The Appraisers Role In Bankruptcy Court
In this post we discuss the bankruptcy process and benefits of using a certified appraisal in a pending bankruptcy case. This article is not to be construed as legal advise. Consult with a qualified attorney to determine if an appraisal would be of value to your case.
Appraisals play a critical role in bankruptcy proceedings. The value of the debtors assets as of the date of filing for bankruptcy will play a big role in determining the exempt items the debtor may keep and/or the amount of post-bankruptcy payments to satisfy the creditors.
Typically, when a debtor is contemplating bankruptcy, his attorney will ask him/her to list all assets with their values and the amounts owed creditors. Some debtors have a natural tendency to over value their possessions in terms of dollars because their reference to value is what the purchase price was. Their attorney files the asset list with the petition to the bankruptcy court.
The next step in the bankruptcy process is a meeting with the trustee assigned by the court to the case. The trustee is going to be paid on a percentage of the value of the estate. The trustee reviews the asset list and often hires an appraiser to value the assets.
Assets that the debtor will be able to keep, vary from state to state. Generally in Florida, the debtor’s residence is exempt as long as they keep up with the mortgage payments. Up to $1000 in personal property such as home furnishings, clothes, and jewelry are exempted. Up to $1000 equity in the debtors automobile is exempted. Everything else will either have to be turned over to the trustee or purchased back by the debtor. Obviously, the debtor will benefit from a lower valuation to retain more assets.
The debtor has the right to hire his own appraiser to determine value to rebut the trustee’s appraised values. Both the debtor’s and trustee’s appraisers are bound by professional guidelines to be impartial and not be influenced by the parties involved in the case. However, valuations are very subjective and sometimes differ substantially between appraisals.
The debtor and his/her attorney can benefit from a certified appraisal report at the outset of the process for the following reasons.
- The attorney will have solid information about the debtor’s financial situation, so he/she can properly advise the debtor in bankruptcy planning and filing the petition.
- The report will alert the debtor to issues that can be addressed and properly prepared for in the process.
- The trustee may accept the debtors appraisals report and not hire his/her own appraiser.
Randy Kincaid has thirty years experience providing appraisal reports for debtors and creditors. His background as an auctioneer, real estate broker, and auto dealer, gives him an edge in providing fair and realistic appraisal reports that have been used in both state and federal courts.