by: Baran Bulkat, Attorney
When you file for bankruptcy, you must disclose and value all of your personal property in your bankruptcy schedules. In general, the value of your personal property depends on how much it would cost to replace the asset with a comparable item similar in age and condition. Read on to learn more about how to value personal property in bankruptcy.
In Chapter 7 bankruptcy, if the value of an asset exceeds the amount of your exemption, the appointed bankruptcy trustee can sell it to pay back your creditors. If you file for Chapter 13 bankruptcy, you must pay your unsecured creditors at least an amount equal to the value of your nonexempt assets through your repayment plan. This means that if you don’t value your personal property accurately, it can put your assets at risk and have a significant effect on the success of your bankruptcy case.
When valuing your personal property in bankruptcy, determine the replacement value of the asset. Replacement value is the cost of replacing an asset with an item similar in age and condition (essentially what a retail merchant would sell a similar item for taking into account its condition and age).
For most debtors, their car or other motor vehicle is their most valuable personal property. Luckily, there are numerous sources you can use to accurately value your motor vehicle including:
Valuation guides. Motor vehicle valuation guides are a good source because they are usually free and easy to use, allow you to customize the valuation to the particular characteristics of your vehicle, and provide a decent estimate of value. If the value of your vehicle is clearly below your exemption amount, using a valuation guide is often enough. But be aware that if the value is close to your exemption amount, it is typically a good idea to get a more accurate valuation through an appraisal.
Comparable sales in the area. If you have an older or unique vehicle, using a valuation guide may not accurately reflect its value. In that case, it may be helpful to check how much people and dealerships are advertising and selling similar vehicles for in your area.
Appraisals. An appraisal is typically the most accurate reflection of your vehicle’s value. In general, an appraisal is most useful if your car is worth close to or above your exemption amount or if you have a unique vehicle (such as an antique or classic car).
Household goods, furnishings, and clothing typically lose their value very quickly after you buy them. A good way to value these assets is to go to different thrift stores, flea markets, or garage sales to see how much used items in similar condition are selling for. However, keep in mind that if you have unique or exceptionally valuable items, consider getting them appraised to get the most accurate value (discussed below).
If you own valuable jewelry, it will typically need to be appraised. When valuing your jewelry, make sure to use a reputable jewelry appraiser and inform him or her of the purpose of the valuation to get the most accurate figures.
Also, keep in mind that if you have any unique items that may interest the trustee, consider getting them appraised and include the appraisal in your supporting documentation. If the trustee thinks that an asset has been undervalued and does not have any documentation to support the value, he or she will typically send an appraiser to value it.