Your Property May Not be Worth Much – But That’s a Good Thing
In our everyday lives, we usually don’t give much thought to what the value of our property may be. But if you file for Chapter 7 bankruptcy, the value of your property becomes a very crucial issue in your case. In some cases, what your property is worth can be the difference between losing property in a bankruptcy and being able to keep it.
Why Property Value Matters
As a general rule, a bankruptcy debtor is given a dollar figure exemption amount for varying kinds of property. So long as your property is worth less than the exemption amount, the trustee, and thus the bankruptcy court, cannot take the property (it’s “exempt” from being taken).
In most cases, someone filing for Chapter 7 bankruptcy has no property that exceeds the exemption amount, and thus the property is safe from being taken. But sometimes the value of someone’s property can be pretty close to the exemption amount.
Let’s look at one exemption—the general, “personal property” exemption, which allows a debtor to keep all property valued at less than $1,000 (that is a total amount—in other words, any and all of the debtor’s property is thrown into a “pot,” the total value is added up, and the debtor gets to keep all of it so long as it is valued, in total, at less than $1,000).
The bad news in real life now becomes good news in bankruptcy. In real life, we would be upset to learn that the stuff we own has little or no value. But in bankruptcy, that’s a good thing—the less your computer, your couch, your clothes, etc. are worth, the more of them you get to keep.
What’s Your Stuff Worth?
How do we know what the items in your home are worth? For many things with nominal value, bankruptcy courts won’t care. The bankruptcy trustee is not adding this up nor do they care about how much your silverware or your socks or your old paint set is worth.
Many of our items are worth much less than we think. Between depreciation, damage to property, and changing tastes and technology, the things you own lose value. The computer you bought three years ago for $1,200 is now worth a fraction of that. To give you an idea of value, you can do your own ebay search (or other website that sells used personal property).
Remember as well that anything with a lien—like a car—is only worth what the equity in the property is. A $50,000 car with a $49,000 lien is only worth $1,000.