Property Valuation: How to Give Your Lawyer Accurate Estimates for Use in the Bankruptcy Papers

by Craig Andresen, Minneapolis, MN, Bankruptcy Attorney

March 21, 2008

In preparing for filing a bankruptcy, your lawyer has probably asked you to provide him or her with a list of all your property, along with your estimate of its market value. This may seem like a major headache, because you may not know what “market value” means. Don’t despair; you can certainly do this in a about thirty minutes, unless you have an unusual amount of property.

“Market value” means the amount of money you or anyone else would receive if your property were sold, fairly quickly, in its current condition. When your lawyer asks for the market value of your household goods, he or she means to ask, what would you receive if you sold all your household goods at an estate sale or a garage sale?

Your lawyer is not asking for the replacement cost or insured value of your household goods; such a figure would certainly be much higher than the market value of used and possibly worn out household goods.

Market value of real estate (for most persons, this means their home) consists of what you could sell your home for, within a month or two, in its current condition, without repairing it or making improvements, in the current housing market.

This is often different from the value the local property tax assessor has estimated for tax purposes. After all, the tax assessor has likely never seen your real estate, so how could the assessor provide an accurate market value figure? Additionally, political considerations often cause the tax assessor to underestimate the value of real estate. Instead of using the tax assessor’s figure, consider obtaining an appraisal from a licensed appraiser or a market analysis from a real estate agent.

For motor vehicles, there is the NADA guide or the Kelly book for determining market value. Your lawyer probably has such a guidebook in his or her office. You will notice that the vehicle guidebooks contain figures for vehicles in very good condition, with no need for repairs or cleaning, with average mileage. If your vehicle has body damage or needs repair, or has low or high mileage, these deviations need to be accounted for.

Additionally, if you are filing chapter 13, use the average retail value; if you are filing chapter 7, use the average retail value minus an adjustment for a dealer’s costs of sale, so you are estimating what a private party would receive upon selling your vehicle.

For other items, such as jewelry, clothing, recreational equipment, and the like, follow the same approach: market value is what the items would sell for if they were sold in their current condition in a reasonable manner. For example, a framed picture purchased at the mall for $100 would likely be sold at a garage sale, but a Picasso painting would be sold at an auction house such as Sotheby’s (needless to say, this is highly unusual in consumer bankruptcy cases).

Estimating market value is always just that, an estimate. It is not a scientific inquiry, but it does involve the application of common sense. If you give some thought to the market value of your property when you initially provide your bankruptcy lawyer with a list of your assets, you can make your lawyer’s life easier and streamline your case.

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Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.

Last modified: March 21, 2008