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.

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.

Get a free, confidential bankruptcy evaluation. Learn More

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.

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.

Considerations

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.

Get a free, confidential bankruptcy evaluation. Learn More
How to Determine the Value of a Car in Bankruptcy Proceedings

References

Resources

Related articles

The Average Cost of Chapter 7

Filing a Chapter 7 bankruptcy case may seem like a costly endeavor. The fees and costs associated with a bankruptcy filing can add up quickly, but when you consider the emotional and financial toll you might suffer by trying to pay down debts you cannot afford, the cost of a bankruptcy proceeding seems more reasonable.

Schedule F Bankruptcy Discharge

Bankruptcy means a fresh start – a court order protects you from collections and lawsuits, and eventually, the court discharges (cancels) some of your debts. You must report your assets and liabilities, and you will be required to sell your non-exempt property to repay creditors (in Chapter 7) or set up a repayment schedule (in Chapter 13). As your bankruptcy case begins, you'll complete a Schedule F, and it's vital to know the difference between a secured and unsecured debt when preparing this form.

Guidelines for Filing Chapter 13 in Minnesota

Personal bankruptcy can help Minnesotans with heavy debt loads get some relief and a financial fresh start. Most aspects of Chapter 13 bankruptcy proceedings are governed by federal bankruptcy rules rather than Minnesota state law, but some areas of bankruptcy are state-specific, such as where you must file your petition and which exemptions apply to your case.

Related articles

Pros & Cons of Filing Bankruptcy

Individual debtors frequently file for bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code, and either ...

How to File Bankruptcy With Unsecured Debt

Many people who file for bankruptcy do so because they seek a financial clean slate and relief from a heavy debt ...

Can a Bankruptcy Trustee Block a Discharge?

A bankruptcy trustee is a neutral professional appointed by the federal bankruptcy court to administer your bankruptcy ...

How Much Cash Is Exempt in a Bankruptcy?

When debts become overwhelming, debtors may turn to bankruptcy to give them a fresh start. Depending on the type of ...

Browse by category
Ready to Begin? GET STARTED