There are specific provisions for bankruptcy exemptions in both state and federal laws. You don’t lose everything even if you go bankrupt. When a person files a petition under chapter 7, all his/her assets are liquidated except for the ones that are legally exempted, such as home, car, household goods, retirement savings, jewelries and many other such things up to certain limit. However, in order to make the best use of these exemptions, you must know how to calculate the value of properties the right way. The following information will help, and a real estate lawyer should be able to better help you by focusing on your specific case as well.
Current Sale Value
There are several factors that are taken into account when it comes to evaluating assets that you are claiming as exempt, such as its age and current condition. That is the reason properties under bankruptcy exemptions are always valued at their current sale value. The sale value can be estimated by comparing the value of similar used products in consignment shops and auction stores. You can even contact these stores and request them to provide you an estimate for the goods claimed as exempt.
Quick Sale Value
If it is a real estate property, you should try to find out its “quick sale value”, the price you will get if you sell it within a week. You will obviously try to negotiate as high a price as possible. That’s not a problem as long as you are fair in your estimates. The trustee who has been appointed to deal with the liquidation process of your assets will accept a “fair” quick sale price for your home claimed in bankruptcy exemptions, which is the net value after deducting repair costs, closing costs, and commissions. You can use the services of a professional real estate appraiser for this purpose. The trustee is very much likely to accept the estimates provided by a licensed appraiser.
Properties Subject to a Lien or a Mortgage
When it comes to evaluating assets and properties that are subject to a lien or a mortgage, only the equity value is taken into account in order to determine the limits for bankruptcy exemptions. The formula to calculate equity value is very simple. You first have to get the current sale value of the asset and then deduct the amount of liens or mortgages from it.
Prorated Equity
When it comes to the valuation of co-owned assets, their prorated equity is taken into consideration. For example, if it is a boat and you own only one-third of the interest in it, only your share of equity will be considered to determine the exemption limit.
The estimate you provide is thoroughly reviewed by the trustee appointed by the court. Therefore, you are strongly recommended to follow the concept of maximum disclosure and fair evaluation while you are estimating the value of bankruptcy exemptions. If the trustee finds you guilty of hiding certain assets or evaluating the same in a way that is unfair, criminal charges may be filed against you.