How to protect DVC as Asset Due to a Foreclosure

[Ariel Girl]

Hi,
I was hoping to get some feed back, and maybe someone out there can help me...I wanted to ask..how I can protect a DVC purchase, from a bank taking it away from me due to a foreclosure. I want to purchase my first DVC plan, with cash...I dont own yet..but want to purchase soon. I had to walk away from an investment property, that I purchased for $150,000. and now is worthless...selling for $20,000 now. My husband and I have been throwing good money after bad..and we realized we could never get our money back, and have walked away from this bad investment. We have no problems paying for our home and current bills...we dont have a bankruptcy or anything...we just decided to walk away from a bad investment.
Now I want to purchase a DVC plan with cash...but I am worried that the bank might come after us...in 6 months or a year, and try to get the rest of the balance from the mortgage we owe.
I wanted to ask, if anyone out there might know, how to purchase a DVC, in a way, that they cant take it away from us......any tips on how to hide the purchase of a DVC plan, as an asset...so they wont be able to take it away from us..in case the bank decides to come after us for the balance of the mortgage, after a foreclosure...we just walked away a month ago, so this is all new to us.
Thanks for any help!
Ariel Girl

 

[windi622]

I'm no expert (legal or otherwise), but I would think you could look into the possibility of setting up a trust, and purchasing the DVC in the name of the trust. My understanding is that might protect it from any personal liabilities you have. Just a thought

 

[JimMIA]

My advice is to get your advice from an attorney, not from anonymous posters on the Internet. A trust is one way, but there are other ways to protect assets. You need to sit down and have an in-depth discussion with an attorney who specializes in asset protection to determine the best of several alternatives for your family.

Just FYI, our DVC (and Wyndham) holdings and several other assets are held in a family trust. I set up the trust, and to do it right requires a good bit of time, planning, and some expense. Have an attorney do that for you. DON'T go to Office Depot and buy a blank trust document and fill it out for one asset. My Dad did that as a primitive form of estate planning, and when we set our trust up, I had to transfer ownership of 31 of those stupid things to the real trust!

 

[SuzanneSLO]

I would be more concerned about losing my home than about losing a DVC investment.

You should talk to an attorney in the state in which your investment property is located about a possible deficiency judgment. In some states, I understand that a bank may try to collect any balance due (loan minus current value - minus bank costs to collect) from you or any other property you own.

Even if the lender cannot collect anything else from you, you should also talk to your tax advisor about any possible tax implications from the foreclosure. You don't want to buy DVC now only to find you have a big tax bill coming soon.

Once you are good on these issues, you should have no concerns about buying DVC. -- Suzanne

 

[Ariel Girl]

Hi, thanks for your advice, I do have an attorney, and will be contacting him soon about this...I just thought maybe someone on the board maybe had a similar experience.
Thanks!

 

[scottb8888]

How can you transfer your points to a trust?

 

[Disney Dreams]

...I had to walk away from an investment property, that I purchased for $150,000. and now is worthless...selling for $20,000 now.
...Now I want to purchase a DVC plan with cash....

I am not sure I understand your question and want to make sure I am reading it correctly. You defaulted on a $150,000 property, leaving the bank holding the loan. You now want to spend $20,000 on DVC? And keep the bank that is dealing with the abandoned loan from getting to the $20K? Is that correct?

- Dreams

 

[JimMIA]

How can you transfer your points to a trust?

For existing points, you would create the trust and then deed ownership to the trust through DVC Member Administration.

For a new purchase, you'd create the trust and the trust would actually purchase the DVC contract.

As I mentioned above, it would not make much sense to create a trust just to hold one or two assets. Any use of trusts, corporations, or any other approach should be a part of an overall asset protection/succession plan.

There's a LOT more to trusts than discussed here, so anyone who is interested should consult an attorney who specializes in trusts in their community.

 

[drusba]

Whether you can actually protect the assets by setting up a trust is subject to question. Whether you can do anything to protect DVC is something for which you should seek legal advice. However, you have a more immediate issue. You still apparently owe on a mortgage on the property you are now "walking away from." You should see a lawyer now because walking away means the bank is going to come after you for the amount owed on the mortgage if it cannot be recovered with the property after foreclosure. Also, if you just stop making payments, penalties and additonal interest may accumulate on what you owe. Moreover, failure to pay real estate taxes will result in a local government agency also coming after you and adding monetary penalties. Your credit rating is likely to take a hit. You should be taking steps now to resolve all issues with the lender and actually rid of your property

 

[JimMIA]

Whether you can actually protect the assets by setting up a trust is subject to question. Whether you can do anything to protect DVC is something for which you should seek legal advice.

If I'm not mistaken, drusba IS an attorney, and they're giveing you sound legal advice. If you set up a trust -- or any other device -- to protect assets and attempt to shield them from creditors after a default, that's not likely to be successful. A lot of judges were born at night, but not last night, and they're going to see right through that. Using some scheme to try to protect an asset is likely to look like a scheme to keep assets from creditors who have a rightful claim -- and courts tend to frown on that just a bit.

And what follows is very good advice:

However, you have a more immediate issue. You still apparently owe on a mortgage on the property you are now "walking away from." You should see a lawyer now because walking away means the bank is going to come after you for the amount owed on the mortgage if it cannot be recovered with the property after foreclosure. Also, if you just stop making payments, penalties and additonal interest may accumulate on what you owe. Moreover, failure to pay real estate taxes will result in a local government agency also coming after you and adding monetary penalties. Your credit rating is likely to take a hit. You should be taking steps now to resolve all issues with the lender and actually rid of your property

If you've dug yourself a hole, the first thing you need to do is STOP DIGGING.

 

[ilikedvc]

The lender has every right to go after any deficiency you have from walking away from your mortgage loan. Even though you consider it an investment you signed a promissory note - a promise to repay the mortgage. The lender will say "If you have the money to buy into DVC you could have made your payments"

 

[awilliams4]

I am not sure I understand your question and want to make sure I am reading it correctly. You defaulted on a $150,000 property, leaving the bank holding the loan. You now want to spend $20,000 on DVC? And keep the bank that is dealing with the abandoned loan from getting to the $20K? Is that correct?

- Dreams

Seems that the taxpayer would be paying a just a bit one way or another for this in today's climate.

Seems like this may be part of our problems.

 

[dianeschlicht]

I some ways this whole idea seems like a Ponzy.

 

[OrangeCountyCommuter]

DVC is the LEAST of your concerns. Your house, retirement etc are at risk NOW!

You don't really just get to "walk away" as you may discover.

Get an attorney NOW! As someone else posted, advice on here really is not the way to go in this case!

And you are going to be potentiallly liable for taxes.....depending on what your lendor did.

Walking away was probably NOT the way to go, the long term consequences will probably bite you....

(not to mention the entire "moral question" that's going to start being debated on here )

 

[mrsg00fy]

Let me see if I have this straight.

A bank loaned you money to purchase a property as an investment. You signed a note....ie....a promise to repay.

You have the means but have decided that you don't want to pay anymore....
because the asset you purchased isn't worth what you paid for it.

You want to make another major purchase but shield it from the bank that loaned you money?

Now you want folks to help you get out of what you owe?!!!!!!!

If you can afford a discretionary luxury purchase, you should consider paying the bank what you owe them.

 

[rlmas]

As a banker who deals with commercial/investment customers every day, I have to agree with the previous posters that have made the points about morals and promises to pay. You are the investor and as such get all of the upside when an investment goes well. Likewise, you absorb the downside. The bank only gets it's money back with some interest. If your investment had doubled, the bank would not be asking for additional money from you. If more people would take responsibility for their actions, our country would be better off. No one helped me when my 401k went down during the recession. I know it is difficult, but tighten your belt and pay what you owe then get back to the luxuries of life.

Sorry to rant here, but this one struck a little close to home for me.

 

[staceymay00]

Maybe you consulted with an attorney before you walked away from this investment that did not go your way, but if not you might have more to worry about than protecting a DVC purchase. I am no expert, but I believe there could possibly be tax implications and the lender may be able to go after you for their loss.

I have to wonder who really ends up paying for these loans people walk away from. Is some of it passed on to taxpayers, bank customers, etc? Sorry, I am having too much trouble getting past the idea of others bearing the burden of your investment loss to think about ways to shield DVC from the lender you did not pay.

 

[Dean]

Hi,
I was hoping to get some feed back, and maybe someone out there can help me...I wanted to ask..how I can protect a DVC purchase, from a bank taking it away from me due to a foreclosure. I want to purchase my first DVC plan, with cash...I dont own yet..but want to purchase soon. I had to walk away from an investment property, that I purchased for $150,000. and now is worthless...selling for $20,000 now. My husband and I have been throwing good money after bad..and we realized we could never get our money back, and have walked away from this bad investment. We have no problems paying for our home and current bills...we dont have a bankruptcy or anything...we just decided to walk away from a bad investment.
Now I want to purchase a DVC plan with cash...but I am worried that the bank might come after us...in 6 months or a year, and try to get the rest of the balance from the mortgage we owe.
I wanted to ask, if anyone out there might know, how to purchase a DVC, in a way, that they cant take it away from us......any tips on how to hide the purchase of a DVC plan, as an asset...so they wont be able to take it away from us..in case the bank decides to come after us for the balance of the mortgage, after a foreclosure...we just walked away a month ago, so this is all new to us.
Thanks for any help!
Ariel Girl

I don't disagree with anything else posted and one must be buddy's with a good lawyer who specializes in this area. I'll simply add that WHEN you truly get this behind you either by dealing with the legal action, paying it, short selling the investment property or by arranging a settlement; then and only then should you consider buying a luxury purchase including a timeshare, car, etc.

:Editorial and broader thoughts: The one who owns the mortgage will often go after people in this situation. IF one opts for bankruptcy one should be able to protect the primary residence and qualified retirement plans. I'd love to see the look on a judge's face in such situations if he is told you didn't pay your obligations and then went and paid that kind of money for such a luxury. That's especially true when they produce this thread which likely makes it a criminal offense. As a minimum, the affect on one's credit for all of the above options other than simply paying it will be huge. That would include that debts that have a variable interest rate like CC can shoot them up to the highest max, usually over 20%.

 

[CarolMN]

I...(snip).... I'd love to see the look on a judge's face in such situations if he is told you didn't pay your obligations and then went and paid that kind of money for such a luxury. ......

This same type of behavior (spend money on luxuries during bankruptcy proceedings) got Denny Hecker a much long prison sentence on his fraud prosecution than he would he gotten had he cooperated with the bankruptcy trustee.

Denny Hecker, former auto mogul in Twin Cities area was sentenced to 10 years in prison for fraud. He hid money and assets, and then spent the money on things like country club memberships and also funneled the money to his girlfriend and ex-father in law.

 

[BWV Dreamin]

The only type of trust that would protect this asset is an IRREVOCABLE TRUST. Otherwise, no, any other type will not.

Whether you can actually protect the assets by setting up a trust is subject to question. Whether you can do anything to protect DVC is something for which you should seek legal advice. However, you have a more immediate issue. You still apparently owe on a mortgage on the property you are now "walking away from." You should see a lawyer now because walking away means the bank is going to come after you for the amount owed on the mortgage if it cannot be recovered with the property after foreclosure. Also, if you just stop making payments, penalties and additonal interest may accumulate on what you owe. Moreover, failure to pay real estate taxes will result in a local government agency also coming after you and adding monetary penalties. Your credit rating is likely to take a hit. You should be taking steps now to resolve all issues with the lender and actually rid of your property