When completing the bankruptcy forms, you must provide the value of each item of your personal property, such as cars, furniture, jewelry, and the like. You will list these values on Schedule A/B of the bankruptcy forms, as well as a few other forms. The standard you use in valuing your personal property is the current value. Read on to learn the various methods you can use to get this value for each of your personal belongings.
Current Value
When you list all of your property on Schedule A/B, you’ll be asked to provide the “current value” of your personal property, which includes everything other than real estate. Another term for current value is the “fair market value.” Fair market value is the price that a willing seller and buyer would agree that the item is worth assuming that there is no particular pressure to conclude the sale.
It’s not the cost of replacing your items with new items. The value will likely represent the amount you paid for the item, minus deductions for wear and tear. The current or fair market value will be what a reasonable person would be willing to pay for your items. You’ll list the current value as of the date you file for bankruptcy.
Valuation Methods
The best method for determining the current value for your property will depend on the property type.
Motor Vehicles
You’re likely familiar with valuing a car or truck. It’s not much different in bankruptcy.
• Trade publications. If the vehicle is only a few years old or there is still a high balance owed on the auto loan leaving little or no equity in the car, looking up the retail value in a trade publication or its online version might be all you need to do.
• Comparable sale prices. If you have an older vehicle, the trade publications might be less helpful. You could check the newspaper advertisements or online sites to see what people in your area are selling similar vehicles. Also, you can check local used car dealerships to look for comparable vehicle prices.
• Appraisals. You could also have your car appraised. Some car dealerships will provide an appraisal, but you need to be careful that they are not providing you with a trade-in value that is dependent on your buying a new vehicle from them. The appraisal should represent the amount you would need to pay to replace your current car. Another option would be to pay a professional appraiser to assess the value of your vehicle. Your mechanic might be helpful in providing a value, but the bankruptcy trustee or the court may be a little suspicious if you receive an appraisal from someone with whom you have had a long time relationship. Information from your mechanic on any necessary repairs or problems with your vehicle may help the appraiser make a more accurate valuation. Be sure to take into account the age and condition of the vehicle, and whether particular repairs will be necessary. Also, be prepared to bolster your valuation with photographs and repair estimates, as appropriate.
Household Goods
You can use different methods for valuing your household goods, including furnishings, clothing, and electronics, depending on what best fits your situation.
• Comparable sale prices. A reasonable way to value your household items would be to visit various thrift stores, or local flea markets and garage sales, to see what comparable goods are selling for. Keep a record of the dates and locations you visit to support your valuation. You can also check online sales or auction sites. Wherever you find your values, make sure to list the age and condition of the property to give the trustee a better idea of what you are valuing.
• Appraisals. Although often unnecessary, you can always use an appraisal for any household item that’s of particular value, such as any antiques that you might own. Keep in mind that you likely won’t need to go to the expense unless the bankruptcy trustee appointed to your case is attributing a value that you don’t agree with.
Jewelry, Furs, Artwork, and Collectibles
These types of items could need an appraisal. Make clear to the appraiser that you are looking for a current sale value appraisal and not an appraisal for insurance. The valuations may be different. Pawnshops might give you the lowest appraisal value, but because they have a reputation for undervaluing property, the appraisal would likely draw an objection by the trustee. A reputable dealer in estate property may be the best source for appraisals on these items.
Bankruptcy Appraisal on Personal Property
Part of the filing process in bankruptcy includes listing personal property and its value. In bankruptcy you refer to the replacement value or the amount it would be worth if sold by a retail merchant based on the condition and age of the property. Depending on the item itself, you’ll get an idea on how you should determine its value. Supporting documentation related to property values may be reviewed by the trustee upon request.
Household furnishings such as televisions, computers, video equipment, etc. are likely to have a value similar to items found in consignment shops or online auctions. Compare your findings and keep a record by noting the date and source you got your estimated amount from. Items that are really old and worn may have little or no value.
Personal property such as jewelry, furs and artwork may need an appraisal from a licensed appraiser or auctioneer.
You can obtain a written appraisal for bankruptcy purposes from most dealers. Mention to the appraiser you want the current market value amount. Failure to properly disclose assets and their respective values could jeopardize your case. You may not be granted discharge of debts and could face penalty fines. Being honest is an important factor; items need to have an accurate value to be eligible for protection through state and federal exemptions. Plus, appropriate documentation helps support values placed on property were made in good faith.
The three types of assets when filing bankruptcy
To understand which assets are at stake for liquidation under Chapter 7, it’s helpful to know the types of assets that can be included in a bankruptcy estate.
There are three types of assets in bankruptcy:
• Personal property. This is what’s considered material goods; examples include clothing, furniture, artwork and vehicles.
• Real property. Real property includes land and improvements or buildings tied to land, such as a house or barn.
• Intangible property. As their name suggests, intangible assets include property that isn’t physically material, but has value. For example, child support, alimony and retirement savings are intangible property.
Exempt and Nonexempt Assets
Some assets are exempt from bankruptcy proceedings. Federal exemptions exclude certain assets from being liquidated, and many states have their own exemptions. These exemptions can include clothing, tools needed for work or health-related purposes and other assets. As a part of the liquidation process, a court-appointed trustee is assigned to a bankruptcy estate to gather and oversee the debtor’s nonexempt assets. Nonexempt assets aren’t protected under the Bankruptcy Code and are sold for cash. The cash is then redistributed to creditors.
When listing assets in bankruptcy, debtors must file a full record of all asset types they own. As part of the bankruptcy filing procedure, debtors are required to provide the court with a list of their assets, also known as a schedule of assets.
Secured and unsecured assets must be reported when filing a schedule of assets. Examples of assets in bankruptcy filings include:
• Land or a primary or secondary home
• Vehicles
• Financial assets (e.g., investments or deposit accounts)
• Personal and household items
• Business-related property
• Property related to farming and commercial fishing
• Any other property otherwise not stated
If a debtor is claiming any of the listed assets as exempt, they need to file a separate schedule listing the assets for exemption. The court relies on the debtor to file a complete schedule of assets so the trustee can administer and liquidate the estate as needed. Only assets that are owned by the debtor at the time of filing are included in the bankruptcy estate and considered for liquidation.
Those who hide or deliberately fail to report assets from the bankruptcy case risk having their bankruptcy discharge petition denied or revoked.
What Is A No-Asset Bankruptcy Case?
In a no-asset bankruptcy case, an estate doesn’t have nonexempt assets that can be liquidated. According to the Administrative Office of the U.S. Courts, most Chapter 7 bankruptcy petitions have this designation. In this situation, the trustee files a “no asset” report with the court. Since the estate doesn’t own unprotected assets that can be sold, unsecured creditors won’t receive distributions from the bankruptcy case.
Nonexempt assets that are later uncovered by the trustee can still be recovered and then sold from the bankruptcy estate, however. The debtor’s unsecured creditors are notified by the court and must file proofs of claim within a specified time frame to secure sale proceeds.
Key considerations
Debtors who are listing assets in bankruptcy should be aware of a few details that can affect the value of their estates and the assets they can claim as exempt.
• Each state has its own asset exemption list. States can enforce their own list of exempt assets in addition to federally exempt assets.
• State exempt assets have a value limit. States also set their own limits on exempted assets up to a certain dollar amount. For example, in Utah, jewelry is an exempt asset as long as the aggregate value is $8,725 or less.
• Married couples can file individual or joint bankruptcy petitions. A debtor can file for bankruptcy individually or with their spouse. Regardless of how a debtor files, the non-filing spouse must also provide a list of their assets so the court can determine the scope of a household’s financial situation.
• Secured debt can be reaffirmed. A debtor can choose to reaffirm secured debt for property such as a car or home. This means that under a written agreement with their secured creditor, the debtor promises to continue making payments and being liable for the debt. The reaffirmation agreement is then filed with the court, and the creditor agrees not to repossess the property as long as the debt account remains in good standing.
Household Goods and Furnishings
Household goods and furnishings include furniture, electronics (including computers, TVs, and audio and video equipment), silverware, and other miscellaneous items found in your home. A good way to arrive at the replacement value of these items is to use the secondary marketplace value. You can get these from a thrift shop, Craigslist, or eBay. Look for the average cost of items that are similar in age and condition to your own. Keep records of the dates and places from which you arrived at these values, in the event that the trustee asks for documentation supporting your numbers. As a practical matter, very old and worn-out household items generally have little value.
Furs and Jewelry
The best way to value furs and jewelry is to get a written appraisal from a licensed appraiser. Many dealers of estate property are licensed and qualified to appraise assets for bankruptcy purposes. Trustees often request documentation supporting your values, and written appraisals will help insure that you have valued your property accurately and in good faith. Tell the appraiser to assess the property based upon today’s market value, given the age and condition of the property.
It is usually not a good idea to get appraisals from pawn shops or use appraisals written for insurance purposes. Pawn shop values tend to be low, and appraisals for insurance purposes tend to be high. This means they may not accurately reflect the Bankruptcy Code’s standard for replacement value.
Works of Art
The value of art work can range from very valuable to little or no value. Often, you can determine this based on the amount that you paid for the item. If you are unsure of its value, it is best to have it appraised by a reputable art dealer, auctioneer, or licensed appraiser.
Your Duty to Disclose
When you include your personal property and replacement values on your bankruptcy schedules, you do so under penalty of perjury. This means that you have a duty to disclose all of your assets and their respective values, truthfully and honestly. Failure to do so may result in fines, penalties, a loss of your discharge, or all of the above.
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