People who file bankruptcy are required to disclose all of their assets and the value of those assets. Some of my clients have trouble placing a value on certain things, such as a wedding ring or pet. When I ask how much these items are worth, I get responses like “Priceless!” or “Unknown.”
Different people value assets in different ways. The method you choose isn’t important as long as your valuations are reasonable. I tell people to ask themselves how much they could get if they sold the sofa/TV/desk/etc. in its current condition at a garage sale or auction. Very few things have an intrinsic value; they are worth only what someone is willing to pay. While your pet may be priceless to you, there is a limit to what Joe Blow on the street would pay you for it. And even if you don’t know how much your wedding ring is worth, there are plenty of professionals who can tell you what it would sell for.
You’re required to disclose how much your assets are worth to a hypothetical, objective third-party buyer. You’re not setting the price at which you would sell. For example, you might not sell your engagement ring for any price because the emotional attachment is worth more than any dollar amount. That doesn’t change the fact that our hypothetical, objective third-party buyer would pay $500 for it. Keep in mind that we’re not asking how much your assets mean to you; we’re asking for your best good-faith estimate as to how much a reasonable third-party would pay to own them.
When valuing your assets for a bankruptcy filing, reasonableness is the key. While you don’t need to get an appraiser to tell you if your silverware is worth $5 or $6, you do need to make a reasonable inquiry into the value of your assets. If you really have no idea whether your baseball card collection is worth $10 or $10,000, you need to make a reasonable effort to find out. What is a reasonable inquiry? Depending on the nature of the asset, you could take it to a collector, jewelry store, or pawn shop. You could go to garage sales and auctions or look on eBay and Craigslist to see how much people pay for similar items. It might also be reasonable to estimate values yourself. If you purchased your sofa eight years ago for $500, and since then the kids have thrown up on it, the dog has peed on it, and the cat has scratched up the arm, you might reasonably estimate that it’s worth $75 today.
Valuing assets is important, but you don’t need to worry about it. You probably won’t lose anything, because of the applicable exemptions. If you state on your bankruptcy schedules that you own an original Picasso painting that’s worth five bucks, the trustee may send out an appraiser to verify your claim. But no one is going to send an appraiser to your house to make sure your easy chair is really worth $50 and not $60. As long as your value estimates are reasonable, you’ll be fine.
Bankruptcy attorneys from around the country are taking part in this “Bankruptcy Alphabet” exercise. Please take a few minutes to check out these other blog posts on the letter “V.”
Bankruptcy Versus Other Options – by Allen Park, Michigan bankruptcy lawyer, Christopher McAvoy
Value – by Silicon Valley Bankruptcy Attorney Cathy Moran
Value of Your Bankruptcy Attorney – by Peter Behrmann, Livonia Michigan Bankruptcy Attorney
Vehicle – by Omaha/Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell
Venue – by Cleveland Bankruptcy Attorney Bill Balena
Venue – by Metro Richmond Bankruptcy Attorney, Mitchell Goldstein
Vesting – by Jay Fleischman, a bankruptcy lawyer in New York
Violation of the Automatic Stay – by Hawaii Bankruptcy Attorney. Stuart T. Ing
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