5 ms·

Is there a business model where people could pay to sell their timeshares to a shell company and then having the company go insolvent?

lisper 2y ago
IANAL but I'm pretty sure that would be considered fraud.
- crooked-v 2y ago
  The "Texas two-step" has been used by plenty of companies and is structured around exactly those sort of shenanigans. https://www.investopedia.com/texas-two-step-bankruptcy-definition-5225888 https://www.investopedia.com/texas-two-step-bankruptcy-defin...
  - csinode 2y ago
    The "Texas two step" is also notably controversial and has been overturned by courts several times, including the most recent attempt: https://www.reuters.com/legal/jjs-ltl-units-bankruptcy-dismissed-by-us-appeals-court-filing-2023-01-30/ https://www.reuters.com/legal/jjs-ltl-units-bankruptcy-dismi...
    - maccard 2y ago
      If you need to take your case to an appeals court to be protected, it's not a protection for an everyday person.
  - lisper 2y ago
    Heh, TIL.
  - MereInterest 2y ago
    Though from the wikipedia article [0], it looks like it has only been used successfully three times (2017, 2019, and 2020). There's a fourth in-progress by Johnson&Johnson, where the summaries state that the bankruptcy has been twice dismissed by courts as being invalid. [0] https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy
xxr 2y ago
I believe most timeshare owners are contractually bound only to sell to individuals, not to LLCs or some other legal entity for this exact purpose.
- bawolff 2y ago
  Couldn't you just find a real person who is on the verge of bankruptcy and offer them $10 to take the timeshare?
  - beaglesss 2y ago
    Sounds like fraudulent conveyance.
    - bawolff 2y ago
      Reading https://en.m.wikipedia.org/wiki/Fraudulent_conveyance https://en.m.wikipedia.org/wiki/Fraudulent_conveyance it doesnt seem like it fits to me, but ianal.
    - lnxg33k1 2y ago
      Oh because a contract that is like a cronic disease is the highest point of lawfulness
      - vkou 2y ago
        It's not a question of what's lawful or not, it's a question of how much of a pain the litigation is going to be.
wmil 2y ago
The contracts usually state that they can go after the original owner if the new one can't pay. So even paying a terminally ill patient to take it over won't work.
- setopt 2y ago
  Is that considered a legal contract?
  - sandworm101 2y ago
    Well, it is either a legal contract or an illegal contract that you will have to fight about in court. Rich people who can afford attorneys generally do not buy timeshares. No lawyer would ever suggest that any client buy a timeshare. So, in other words, anyone with access to a family lawyer would never buy a timeshare.
    - immibis 2y ago
      If it's illegal, you can simply not pay, and THEY have to fight it in court. You can also do this if it's legal, but the court might not be favourable to you.
      - sandworm101 2y ago
        >> you can simply not pay, and THEY have to fight it in court. Yes. They will sue you in court. Then, when you don't answer and/or attempt to represent yourself, you will end up paying the default judgement. A judge isn't going to nullify a contract on their own. You have to explain to them why the contract is illegal, which is not as easy as everyone seems to think. That is what lawyers are paid to do.
    - setopt 2y ago
      That’s why many countries have government “watchdogs” you can report illegal contracts to, who will investigate it and potentially sue the company if they believe its a scam or somehow against consumer rights.

lisper 2y ago

IANAL but I'm pretty sure that would be considered fraud.

crooked-v 2y ago
The "Texas two-step" has been used by plenty of companies and is structured around exactly those sort of shenanigans. https://www.investopedia.com/texas-two-step-bankruptcy-definition-5225888 https://www.investopedia.com/texas-two-step-bankruptcy-defin...
- csinode 2y ago
  The "Texas two step" is also notably controversial and has been overturned by courts several times, including the most recent attempt: https://www.reuters.com/legal/jjs-ltl-units-bankruptcy-dismissed-by-us-appeals-court-filing-2023-01-30/ https://www.reuters.com/legal/jjs-ltl-units-bankruptcy-dismi...
  - maccard 2y ago
    If you need to take your case to an appeals court to be protected, it's not a protection for an everyday person.
- lisper 2y ago
  Heh, TIL.
- MereInterest 2y ago
  Though from the wikipedia article [0], it looks like it has only been used successfully three times (2017, 2019, and 2020). There's a fourth in-progress by Johnson&Johnson, where the summaries state that the bankruptcy has been twice dismissed by courts as being invalid. [0] https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy

xxr 2y ago

I believe most timeshare owners are contractually bound only to sell to individuals, not to LLCs or some other legal entity for this exact purpose.

bawolff 2y ago
Couldn't you just find a real person who is on the verge of bankruptcy and offer them $10 to take the timeshare?
- beaglesss 2y ago
  Sounds like fraudulent conveyance.
  - bawolff 2y ago
    Reading https://en.m.wikipedia.org/wiki/Fraudulent_conveyance https://en.m.wikipedia.org/wiki/Fraudulent_conveyance it doesnt seem like it fits to me, but ianal.
  - lnxg33k1 2y ago
    Oh because a contract that is like a cronic disease is the highest point of lawfulness
    - vkou 2y ago
      It's not a question of what's lawful or not, it's a question of how much of a pain the litigation is going to be.

wmil 2y ago

The contracts usually state that they can go after the original owner if the new one can't pay. So even paying a terminally ill patient to take it over won't work.

setopt 2y ago
Is that considered a legal contract?
- sandworm101 2y ago
  Well, it is either a legal contract or an illegal contract that you will have to fight about in court. Rich people who can afford attorneys generally do not buy timeshares. No lawyer would ever suggest that any client buy a timeshare. So, in other words, anyone with access to a family lawyer would never buy a timeshare.
  - immibis 2y ago
    If it's illegal, you can simply not pay, and THEY have to fight it in court. You can also do this if it's legal, but the court might not be favourable to you.
    - sandworm101 2y ago
      >> you can simply not pay, and THEY have to fight it in court. Yes. They will sue you in court. Then, when you don't answer and/or attempt to represent yourself, you will end up paying the default judgement. A judge isn't going to nullify a contract on their own. You have to explain to them why the contract is illegal, which is not as easy as everyone seems to think. That is what lawyers are paid to do.
  - setopt 2y ago
    That’s why many countries have government “watchdogs” you can report illegal contracts to, who will investigate it and potentially sue the company if they believe its a scam or somehow against consumer rights.