If you are planning to file for bankruptcy protection and you own a home, it is important to understand how to value your house in your filing. All debtors must complete certain paperwork and make financial disclosures in their filing, which includes listing all real property owned and the value of the land and all buildings affixed to the land.
So, how do you value your home or other real estate? In bankruptcy, the fair market value (FMV) of your home is commonly used. The FMV is the price you could sell your home in the current marketplace as of the date you filed for bankruptcy. In other words, if you could sell your property for $150,000 on your petition date, the FMV of it is $150,000.
There are different methods that can be used to determine the fair market value of your property. Below are a few examples:
· Formal appraisal. The most reliable method of valuing your home for a bankruptcy filing is to obtain a formal appraisal. This involves hiring a professional to inspect and run a market analysis of the other homes in your area. The downside to a formal appraisal is they are often expensive.
· Market Analysis. A formal market analysis involves a real estate professional analyzing recent home sales and listings in your area to determine what your home will likely sell for. This type of analysis is not as formal as an appraisal.
· Local listings. The debtor can gather local listings and compare them to provide an estimate of his or her home’s value. While this is the most affordable method, it is also the least compelling method of proof. It is often used when the value of your home is significantly less than what is owed on your mortgage.
Generally, you should not rely on property tax assessments to determine the value of your home. The method used by the tax assessor typically does not take the FMV into account, which means it is not as helpful for bankruptcy purposes.
Selecting the right valuation method will depend upon your unique circumstances. Let us help you with filing a successful bankruptcy case.
If you are interested in learning how filing a bankruptcy case can benefit you, contact Levitt & Slafkes, P.C., at 973-323-2953. You can also reach us by filling out our online form. We represent debtors in Chapter 7, Chapter 13 and Chapter 11 filings. Let us help you get the fresh financial start you need today.