How is a home value determined in Bankruptcy

How Is A Home Value Determined In Bankruptcy? Important Facts & Details

In this article, we’ll discuss the important topic of: “How is a home value determined in Bankruptcy?”

Can I save my house even if I file for Bankruptcy? The most frequently asked question. It is essential to find out your home’s actual worth in both Chapter 7 and Chapter 13 Bankruptcy. In a few cases, knowing your home’s real value can decide whether you can keep the house or strip off some of your mortgage values. 

The forms you fill while filing a case on Bankruptcy are called schedules, which have the list of your assets, including land and home. You must mention the correct value of all the properties you have. In this article, we are about to find out how to determine the actual cost of a home and also why it is essential. 

How Is A Home Value Determined In Bankruptcy?

Before we discuss the ways of evaluating the true worth of your home or property, it is essential to know why it is even required. The most important reason is the exemptions you can claim in your home. You need to make sure the equity you have in your property is covered if you file a Chapter & Bankruptcy. 

The next reason is that if you can determine your home’s actual value, you can strip off lower of second mortgages in Chapter 13 bankruptcy. For instance, if your home’s net worth is less than the first mortgage, you can request the court to discharge the second mortgage lien. 

Another crucial reason is that you will have to put forward the true worth of all your properties along with your home on the bankruptcy schedules in court. 

Ways of evaluating the home value

It is not very difficult to determine the market price of your house. Here we have listed a few such ways of finding the true worth of your home. 

  • Official Appraisal

This is the most authentic and the most expensive way. In case of most Bankruptcy, an official/formal appraisal means that you are hiring a real estate person who has the license to come home, take a look at all the aspects, inspect the area for valuation, and then give a report. 

This report is brought to indicate your property’s fair price and is accepted in the bankruptcy courts. The process can cost quite heavily. The appraisal report should be as recent as possible, as fluctuations can influence the market’s market value. 

  • Market Analysis

This is a relatively less expensive process. When a licensed real-estate realtor visits your house, they evaluate the current price and compare it with the recently sold homes and the cost of current listings in the area. 

This will give you a fair idea in which you can sell the house. However, it is less costly than official approval and also less influential. 

  • Local Listing Comparison

This is somewhat simpler and can be done by you. As the name suggests, you can compare all the local listings in your area with your house. You have to consider the house’s current situation and what your neighbor has sold the house for with these conditions. 

This is the least effective method as per the bankruptcy court. However, it is useful under two situations, if you wish to surrender the property or if your mortgage is way above your home’s value. 

  • Property Tax Assessment

This is one method you can avoid to evaluate your house’s worth. Most bankruptcy courts do not consider the value which is provided by a property tax appraiser. They do not consider fair market value. Hence, they cannot be used in Bankruptcy. 

How much equity can I have in my home and still file chapter 7?

To explain simply, you cannot have a lot of equity in your homestead while filing a case of bankruptcy under chapter 7. The trustees will evaluate any non-exempt property you own, if any. And if available, that will be sold to pay back some debt to the creditors. 

What is equity? If your house’s total value is more than the mortgage, property liens, then it is considered that you have equity. Often home equity is said to be an asset.

Under chapter 7 in Bankruptcy, the trustees appointed have all the right to sell all your non-exempt properties, including your home, to reduce the dues with creditors. 

However, if you do not have enough equity or save the equity using the exemption, the trustees can decide not to sell the property. In a lot of states, you can protect some equity of your home.

Final Thoughts

We hope you have understood the importance of evaluating the actual value of the properties and assets in Bankruptcy. It is often seen that many lose their home due to a lack of correct information and evaluation. The equity in your home determines whether or not you get to keep the house. 

Video

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Discolsure: I am not a financial expert and it is highly recommended that you seek out a professional before making any financial decisions. Articles are informational and for educational purposes only.

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