When you file a petition for Chapter 7 bankruptcy, any non-exempt assets may be liquidated and sold to repay creditors. Depending on your state of residence, you will refer to a list of either federal or state exemptions to determine the amount various types of assets that is exempt, or safe, from liquidation.
It is then extremely important to provide an accurate assessment of the true value of your property to the trustee in charge of the case. If you place too high a value on specific items, you may exceed the exempted equity amount and lose property. However, if you provide values that are artificially low in order to keep more property, the trustee may reject your assessments and seize the property.
How to Determine the Value of Your Home
If the equity in your home is close to the limit of the exemption for home equity, you should get your home appraised by a licensed appraiser who handles bankruptcy appraisals. Using home buying websites' appraisal tools or tax assessments to determine your home's value may provide a very different representation of your home's market value that what it is really worth.
Websites that provide home value calculators depend upon comparisons to recent sales of comparable homes in your area, but do not include recent renovations or serious deficiencies that may affect the current market price of your home. Tax assessments are based upon projected value from market trends and comparable values in the neighborhood, and are often phased in over a multi-year period, changing in value each year.
If an appraisal finds that the equity in your home far exceeds the exempted amount, you will need to pay the difference in cash or surrender your home for sale and receive payment for any exempt equity after the sale is completed.
How to Determine the Value of Personal Property
You will be seeking the cost of replacing your personal property, not the current retail cost of buying it new. For example, if you are placing a value on a sofa, you will look for a comparable sofa for sale online or in a thrift store that sells used furniture. Expensive items such as jewelry should be appraised at a jeweler rather than at a pawn shop or similar type of business.
The replacement cost of vehicles can be found on popular websites that provide car values, but you must use the resale value rather than the trade-in value provided to determine the replacement cost of your vehicle. If the value of your vehicle exceeds the exempted allowance, you must pay the trustee any amount over the exemption to keep your vehicle.
Bankruptcy law is difficult, and placing a value on your possessions highly subjective when you fear losing them, so the guidance of a bankruptcy attorney is essential for keeping as many of your assets as possible.