How to Value Household Property in Bankruptcy

By Julie O'Bryan, Esq.   March 1, 2010  Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy Comment

During bankruptcy a debtor is required to reveal all assets and give an estimated value of the property.  When the asset is cash money or an investment, figuring its value is easy.  In other cases nailing down a value can be very elusive.  This is especially true when dealing with a unique or expensive household item.  So how does the bankruptcy trustee expect the debtor to come up with a value for household property? 

To understand how to value household property for bankruptcy purposes, it is important to understand the bankruptcy process.  One of the chief functions of the bankruptcy trustee is to uncover assets for the benefit of creditors.  Federal and state laws allow the debtor to keep certain modest items of household property that are considered “necessary,” like clothing and household items, but only up to a certain dollar amount.  That amount is called an “exemption,” and that property is considered “exempt” and protected from a creditor’s collection remedies.  Any property that is worth more than the allowed exemption amount is subject to be liquidated, usually at auction. 

So the easy answer to how household property should be valued is, “At auction prices.”  Since auction prices can vary, that doesn’t really answer the question at all.  Instead, what most bankruptcy trustees suggest is to set a price like you would at a yard sale.  Additionally, internet resources like eBay can be helpful to determine the quick-sale market value of a unique item.  Using one of these on-line resources can provide good evidence that your new-in-box Barack Obama Chia Pet is only worth $20.00. 

Many used household items, like common dinner dishes or bedding, have little or no value.  On the other hand, a grandfather clock, piano, or gun safe usually has some value. A bankruptcy trustee is not in the used furniture business, and will usually incur significant costs in selling a debtor’s property. Consequently, the trustee will not be interested in your household property unless you own a non-exempt item that can be sold for a substantial profit to the bankruptcy estate.  

As owner of your property, you are entitled to give an opinion regarding its value.  It is important not to under-value or over-value your household property, but instead give a fair and reasonable estimate.  If you own an expensive household, do some research and speak to your bankruptcy attorney.  There are many ways to protect property in bankruptcy and your bankruptcy attorney can help you decide on the best course of action.

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