09 Jan How Do I Value My Home For Bankruptcy?
Valuing your home for bankruptcy is one of the most important steps when filing for bankruptcy. It will depend on what state you live in as to the amount of equity you can protect in your house. Value of the home minus the amount due and owing on the loan = EQUITY.
For instance let’s say that the value of the home is worth $100,000.00 and the loan amount is $80,000.00. Your equity in the home is $100,000.00 – $80,000.00 = $20,000.00. If you live in the State of Missouri you can protect or exempt $15,000.00 in a home. So the end result is the trustee can make you pay $5,000 to be distributed pro rata to the unsecured creditors.
If you live in the State of Kansas you may not have to pay anything because you protect or exempt $125,000 in equity if you purchased the house within 1215 days of filing bankruptcy or if you have owned it longer you may have an unlimited homestead exemption. Yes, Virginia this means that you can own a $1,000,000.00 home outright and file bankruptcy and may not lose your home in the State of Kansas.
Now for most of the nation you do not have an unlimited homestead and must work to protect the equity in your home. So we go back to the original question of, How do I value my home for bankruptcy?
When I begin to evaluate a case and the value of the home I first look at the county assessment for the property. If you pay real property tax your county will send you a statement every year. This statement will list the value of the property from their point of view. This is an official document and can be used in court.
If you cannot find that document you can request another copy or many counties across the nation are online where you can pull the information from. If this value is not in your favor, the document and information gathering will continue.
I then proceed to Zillow and Yahoo Real Estate. These are websites that the trustees use to evaluate the property at first glance. If these are in your favor then I would submit these to the court to support your value. I stress to my clients that the name of the game is document, document, and document. You have to prove your case every step of the way. Don’t rely on your on your attorney to do all the work. You are in a court of law and it is your duty/responsibility to prove your case.
I tell my clients to make no mistake in thinking that the court is human. The judge and trustee may be sympathetic to the fact that you have six kids, out of work and cannot put food on the table but ultimately the trustee must do his/her job. In the end this may mean taking your home!
In valuing a property you can always pay for an appraisal of the property. My view is that filing a bankruptcy is expensive enough so why not try and save a little money. Save the appraisal for the last resort.
Now you have your tax documents, the print outs from Yahoo and Zillow but if you think the value of your home is going to be questioned I would not stop my information gathering there. I would request estimates for repairs needed around the home. Make sure to get the estimates in writing. We know that you are trustworthy but again the trustee may not get such a warm and fuzzy. Not to mention the trustees have to answer to a boss and if they get questioned about the value of the house you are helping them to accept the value of your home.
You can request estimates for roofing, siding, paint, flooring and foundation. Remember a picture can be worth a thousand words. If you think a picture would explain why the value is way over priced than by all means take a picture and submit it to your attorney.
Even if you purchased a new property keep in mind that if you were to resale the property there are generally things you would have to do it to sale it. Many new homes do not come with complete landscaping and you will have to invest in the home before you can turn around and sell it. Step back and look at the property as if you were purchasing it for the first time. What would you want done to the house before you purchase it? These are the things you want estimates for.
When people file bankruptcy they have a tendency to over price their stuff. People tie their success to the value or the number of assets that they have. But this is not how bankruptcy works. You want to give actual values for your “stuff.” Remember that pride goeth before fall.
The whole point of filing bankruptcy is to regain financial control but the law does not require that you pay an arm and a leg or even a house in order to do this.
Written by Rachel Lynn Foley.