Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
Determining what the value of your home is when you file your bankruptcy is a difficult, but important, task.
Years ago, tax assessment values (called various things in various states–here in South Carolina called the “tax appraisal”) tended to be low. Taxing authorities generally could not keep up with the rise in prices.
Then came 2008 and the collapse of the real estate market (or perhaps we should call it the busting of the real estate bubble). Tax assessments, for the first time in my lifetime, tended to be higher than the fair market value of homes.
Trustees review tax appraisals on real estate for cases the administer. So in the past–pre 2008–accurately listing values in bankruptcy cases required adding to the tax appraisals. Now, well, not so much.
Know what your property is worth
All this means you can’t blindly really on tax appraisals for determining the value of your house. Sometimes, they’re right, but usually not. You need to do your homework to accurately list the value of your home.
In some cases values are more important than in others
Let’s take a couple of examples.
In case #1, let’s assume the debtors, husband and wife, own a home and have a mortgage on the property of $200,000. Let’s further assume the tax assessment on the property shows a value of $230,000. Because each of the debtors can exempt (protect) $56,150 of equity in the property, it’s unlikely that even if the tax assessment is low, the value matters much. Even if the value were $300,000, the debtors could protect their equity.
In case #2, let’s assume the couple has the same home, but there’s a mortgage for only $150,000. In that instance a value of $300,000 could cause big problems because the debtors can’t exempt $175,000 of equity.
The lesson here is that (1) you have a duty to accurately value your home, and (2) you need to understand that getting it right is more important in some cases than in others.
If you don’t have a solid basis for what you list as the value of your home, get help! The easiest thing to do is to get a market analysis from a real estate agent who knows the values in your area. And in cases where being accurate is critically important, you should hire an appraiser.