SCHEDULES

A debtor fills out the bankruptcy paperwork and forms when filing a bankruptcy case.  These forms are the Bankruptcy Schedules.   Bankruptcy schedules list all of the assets a debtor owns.  These schedules also list all of the debts that the filer has.  Also, they list down the monthly income and monthly expenses of the debtor too.   Today, however, we will talk about -Assets.

Assets are the things that a bankruptcy debtor owns, such as real estate, vehicles, furniture, jewelry and such.  It also includes items like cash, bank accounts, retirement plans, life insurance and others, such as a workers compensation claim, or a personal injury case.

A debtor lists (or schedules) these belongings on Schedule A and Schedule B of the bankruptcy petition.    Schedule A is where the debtor lists the real estate and property they own.   Things scheduled on Bankruptcy Petition Schedule A are: homes, vacant land, timeshares, mobile homes and the like.   Schedule B contains everything else owned by the debtor.    These assets would include a debtor’s car, bank account, cash, household goods, electronics, furniture, interests in businesses, animals, jewelry, insurance policies, retirement plans, investments, inheritances, claims against third parties.   Assets that also must be listed are sporting equipment, clothing, savings bonds, luxury items like boats, planes, collectibles, antiques, tax refunds, money owed to the debtor, and any other possible thing that you own, or is owed to you.   The list above is not exhaustive.

UNLISTED ITEMS

Many debtors I speak to ask me questions about what they need to list on their schedules of assets.   In short, I tell them to list everything.   Often, debtors ‘forget’ about assets that are not tangible.  For example, when a loved one dies a debtor may inherit their home.   A debtor says “this house isn’t mine” when they have not transferred title yet.    A debtor lists this home on schedule A.   Unpaid personal loans also fit this bill.   Just because they haven’t paid you back yet, doesn’t mean you don’t have the right to that money, now or sometime in the future.  The loan belongs on Schedule B.

EXEMPTIONS

Debtor’s also often want to avoid listing stuff that they ‘don’t want to lose.’  This is completely understandable.  Good news, though.  Bankruptcy attorneys can protect (or exempt) the stuff that you have.   Schedule C is where the bankruptcy lawyer will list down these exemptions and protections for your assets, granted either by the state (here are the Illinois Bankruptcy exemptions), or by the bankruptcy code, depending on where you live, and how long you have lived there.   These are often broad, and vary by state to state.  I’ll talk more about bankruptcy exemptions at a later date.

Assets that are exempt, are not part of the the bankruptcy estate, and aren’t sold by the bankruptcy trustee.  Only unexempted assets are available to the bankruptcy trustee.  The trustee’s job is to determine if there is enough value in the unexempt belongings to make a beneficial payout to the creditors of the debtor in bankruptcy.  The US Bankruptcy Code requires a debtor to schedule all assets, regardless if they are exempt or not.

BANKRUPTCY TRUSTEE

The good news for bankruptcy filers is that chapter 7 bankruptcy trustees liquidate very few belongings.  However, when a trustee finds assets that have not on schedule A or B, the trustee can liquidates them.    If you have assets, tell your lawyer.  Your lawyer can usually protect them.  The goal for a chapter 7 case is for the bankruptcy trustee to file a ‘No-Asset Report.’

A good bankruptcy attorney would recommend chapter 13 if they see a debtor has assets that are worth more than can be exempted, and would review that process with the bankruptcy client if they wish to protect the assets while getting debt relief.    This is why it is important to tell your bankruptcy lawyer about all of the assets you have.  Their are protections for most, and it’s better to know sooner than later, especially since filing false documents in bankruptcy is a crime, and a debtor could be denied a bankruptcy discharge, or worse, be charged with a crime subject to fines and jail time if convicted!

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Each state gives debtors limited exemptions to protect assets, so the proper value of your belongings is crucial. Now, in general, the trustee in your chapter 7 case is not interested in the small stuff like your spoons, your old tv from 1984 etc. The trustee is looking for assets of value that can be liquidated to pay your creditors, such as new electronics, collectibles – autographs, memorabilia, vehicles, equity in homes and such.

 Obviously the debtor and the trustee can have different opinions on value, so for the important stuff, like your house, and your car, valuations or appraisals can be easily obtained.

 For homes: www.Zillow.com is good starting point, although results can vary. A comparable market report from a real estate agent is better, and it is usually free! The best would be a full blown walk thru appraisal, but those can be a few hundred dollars.

 For Cars: www.nadaguides.com retail value is a good place to start (and the go to for trustees and creditors and the judge in Chicago bankruptcy cases) Also Carmax offers free appraisals too if you want to bring your car in. In chapter 7 cases, where the debtor wants to redeem their car, they need a good valuation on the vehicle. The court will look to the value of the car upon motion by the debtor, and can eliminate any over-financed portion of the vehicle note. The debtor would make a lump sum payment to pay off this value (usually obtained thru a new vehicle loan for which there are a handful of lenders I can refer you too). This can save you a lot of money month to month, and over the life of the new loan.

 In chapter 13 cases, secured debt can be crammed down to the fair market value, hence valuation is important here as well, with the unsecured portion often receiving pennies on the dollar with little to no interest. Also in chapter 13 cases, home valuation comes into play by allowing the debtor upon motion or adversary proceeding to strip off a wholly unsecured second (or third) mortgage if the value of the home is less than what is owed on the first mortgage. This stripped off loan can then be paid pennies on the dollar, often saving the debtor thousands of dollars!

 So, as you can see, valuation is very important in the bankruptcy process. Contact me to review your assets and determine what issues you may have, what I can protect in a bankruptcy filing, and what benefits your valuations can provide for your house and car if you are looking to file chapter 7 or chapter 13 bankruptcy in the Chicago area.

The post V is for …. Valuation of assets in bankruptcy appeared first on Chicago Bankruptcy Lawyer.