When filing for bankruptcy, the bankruptcy court, and more particularly the appointed trustee, needs to know what assets you own and what their value are. This enables the trustee to place a value on the bankruptcy estate and to determine how to proceed with the bankruptcy petition. It is important to list every asset that you own, or have a share in, and to accurately place a value on those assets.
Under a Chapter 7 petition for bankruptcy, you can exempt some of your assets from the bankruptcy estate. Each state has its own set of exemptions and values, for example, one state may have a homestead exemption of $100,000 while another only allows $20,000. Any assets in excess of those exemptions could be seized and sold by the trustee. Under a Chapter 13, the value of your assets is used to determine the minimum amount that you must pay. This is determined by working out how much creditors would have received under a Chapter 7 petition, then applying that amount to the your total payments. This is why some Chapter 13 petitions could extend to five years.
So how do you value assets when filing for bankruptcy? Wherever possible, your asset values should be obtained through independent sources. Your home could be valued by an appraiser or, at the very least, a real estate agent. Your car has a current market value that any car salesperson can look up while jewelry can appraised by a jeweler. You can use a guesstimate for most of your smaller assets such as television sets and appliances. Collector items such as stamps and coins generally have a catalog value that can be used.
If you own shares, then the current share value is appropriate. If you part own assets, for example, you have part ownership of a holiday home, then you only need to include the value of your share, however, that does need to be your share of the current market value.
What is important to note is that a trustee will revalue assets before seizing and selling them under a Chapter 7 petition. This takes into account the costs associated with seizing and selling those assets. So a television set that has a resale of $50 probably wouldn’t be seized and sold since, at auction, it will sell for less than this, possibly even less than the cost of seizing and selling. However, under a Chapter 13 petition, the trustee doesn’t always make that discrimination, so the total value of your assets under a Chapter 13 could be higher than under a Chapter 7. This is why it is important to secure the services of a bankruptcy attorney – they will ensure your petition receives a fair hearing under either Chapter.