It is important to properly value your home in both a Chapter 7 and Chapter 13 bankruptcy. This blog will discuss why a proper valuation is important and the types of available valuations.
Why is it Important to Get a Proper Home Valuation?
There are many reasons it is important to get a proper home valuation which include the following:
- You want to ensure that if you file a Chapter 7 Bankruptcy any equity you have in your home is covered by the bankruptcy exemption.
- The valuation of your home can determine if you can strip off “eliminate” junior mortgages in a Chapter 13. In a Chapter 13 bankruptcy, the second mortgage lien may be stripped off and discharged if the amount of the first mortgage is more than the value of the home.
- On the bankruptcy schedules that are filed with the Court you must list the value of all your property including your home.
Methods of Home Valuation
The legal standard for home valuation in bankruptcy is fair market value (the price your home would be sold for) on the date the bankruptcy is filed. It is important to have a recent valuation not more than a few months old. Here are some of the ways a home can be valued.
Full Appraisal. A formal appraisal from a licensed appraiser is the most accurate method of valuing your home for the purposes of a bankruptcy, but it is the most expensive. It is often important to have an appraisal if you are trying to strip off a second mortgage or if there is concern that there might be too much equity in the home to file for Chapter 7 bankruptcy.
Comparative Market Analysis. A common alternative to a full appraisal is a comparative market analysis (“CMA”). This is not as extensive as a full appraisal. The CMA is an opinion by a licensed realtor who compares your home to other homes that have recently sold in your area. A CMA generally costs less than a formal appraisal but is not as respected.
Property tax assessments. Generally, you cannot use the valuation on the property tax assessment for bankruptcy purposes.
How to Pick the Right Valuation Method
The value of your property can be very important to your bankruptcy case. It can mean the difference between keeping and losing your home or eliminating a second mortgage or judgment lien. Selecting the valuation method depends on the purpose of the valuation. The more important an accurate home value is the more formal the valuation method should be used. It is important to speak to your bankruptcy attorney to develop a strategy and determine which valuation is best for your situation.
We Can Help You
If you are interested in learning more about Chapter 7 or Chapter 13 bankruptcy cases and how to properly value your home, contact Levitt & Slafkes, P.C. We are experienced in handling a variety of bankruptcy issues. Our offices are conveniently located in Maplewood, New Jersey. Please call us at 973-323-2953 or online to schedule your free initial consultation today.