What Is a Bankruptcy Appraisal?

By Jim Thomas

A bankruptcy appraisal is a complete financial picture of your income, debts and financial obligations. It is used to establish the ability of a person who is filing, or thinking about filing, for bankruptcy to pay the debts he owes. Under the federal bankruptcy statutes, a bankruptcy appraisal is required by the court. A bankruptcy judge will carefully consider the appraisal in evaluating whether to discharge the debts of the person who files for bankruptcy under Chapter 7 or approve a debt repayment plan under Chapter 13.

Appraised Property

A bankruptcy appraisal consists of an evaluation of all assets owned by the debtor, including real estate and personal property, for both Chapter 7 and Chapter 13 bankruptcies. It is advisable to have these valuations done by a company with experience in bankruptcy appraisals, since bankruptcy judges look at not only the valuations themselves, but the underlying factual analysis from which the valuations are derived. The appraisal should be defensible, easy to comprehend and convincing.

Purposes of Appraisal

The bankruptcy court uses an appraisal for two main purposes. First, the court needs an appraisal to determine whether certain property of the debtor is exempt from the claims of creditors. In many cases, the court will protect a debtor's house and/or other property, such as a car, from the claims of creditors. Exemptions are tricky. The amount of certain exemptions are set forth in federal bankruptcy law, but states are given the power to opt out of the federal standard and substitute their own exemption amounts. Second, the appraisal is used to determine whether the debtor has sufficient assets to pay his debts. If he does, the bankruptcy petition likely will be denied or the debtor will be required to file a Chapter 13 bankruptcy instead and establish a payment plan to pay creditors.

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Appraisals for Debtors

Before going through the bankruptcy process, a debtor might want to test the waters to determine whether he is likely to succeed in getting his debts discharged under Chapter 7, or succeed in getting a repayment program approved under Chapter 13. An appraisal gives a debtor solid factual information about the valuation of his property, which can help the debtor decide which type of bankruptcy to file or whether to file at all.


Don't try to low-ball an appraisal if you are filing for bankruptcy. An appraisal that is not professional, or appears to be slanted in favor of the debtor, is unlikely to find favor with the court. It's illegal to file a dishonest appraisal with the court, and some debtors have been prosecuted for doing so. That's another reason to have an appraisal done by a reputable company. The Read & Kelley appraisal firm in Florida advises a debtor to obtain an appraisal report that is printed and signed, with a complete description of the appraised property, and a description of the methodology used to determine the valuations.

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