Since the passing of the BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) debtors filing bankruptcy are required to value their assets at replacement cost. The truth is, when you hire a bankruptcy attorney they are required to give you a notice of the Bankruptcy Code section 527C. How this was explained to me is, a person must determine how much their property is worth at today's value. This does not mean to value your property at what you can sell it for, but what's required is, how much would you pay to replace it? If the property you are trying to value is new or almost new, it would be valued at what the replacement cost is along with taking into account the condition and age. One way to value property is to look on eBay or go to your local thrift store and get an idea of what they sell household goods for similar to yours.
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What's funny is, this section mentions garage sales, while at the same time says not to value property at what you could sell for. I don't about you, but that sounds really confusing. Prior to the new bankruptcy law going into effect in 2005 people took it for granted to value their property at a garage sale price. Now, I guess what is expected is to value property at retail or what you could buy it for at a used furniture or thrift store.
When filing bankruptcy, most individuals when thinking of property valuation, think about their bank account, car, real estate, stocks and large household items. According to the bankruptcy code, and individual filing bankruptcy is required to disclose everything they own. This list includes everything down to your shoes and socks. Some people filing for bankruptcy will tell their attorney that they really don't own anything of value not realizing that everyone owns something. I have heard a bankruptcy attorney say, "Unless you're naked you will need to list your clothes". This drove home the point that if you live here in America, even homeless, you own something.
To be perfectly honest, most people have no idea of what their property is really worth. If you want to sell a car, you can call a car dealership or look it up on the Internet on Kelley blue book. If you own real estate you can call a realtor and get a comps report of your neighborhood. It gets tough to figure out when you get down to clothes and electronics. How much is an old computer really worth? A person might have paid $2000 for it, but that doesn't mean it's worth that much.
The reason the valuation is so important in a bankruptcy filing is this is what the trustee uses to see if there is enough nonexempt property to warrant selling it to divide the proceeds amongst the creditors. Depending on the valuations of the property a person can also make more of their property exempt by lowering the values. This is what the bankruptcy trustee will be looking for when reviewing an individual's bankruptcy documents. This is why it's very important for an individual filing bankruptcy to be as honest as possible. Lying on a bankruptcy petition is a federal crime and in the least will give the individual a denial of their discharge. And depending on how flagrant a violation is it could bring the bankruptcy filer jail time.
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