Why is a Bankruptcy Appraisal Required under Chapter 7?
A bankruptcy appraisal evaluates and establishes to a court whether a debtor is able to pay back debts or not. It is a detailed document required by the court in order to determine whether or not your bankruptcy filing is considered meritorious. Your home, likely your largest asset, is evaluated along with other property to give the correct picture of your financial status at the time of declaration.
A bankruptcy appraisal is a legal document and is accepted in court only from a state certified appraiser or appraisal firm. The judge in a bankruptcy court may not accept the valuation for a Chapter 7 bankruptcy suit if the appraiser cannot explain the basis for the property valuation in detail. If you wish to file for liquidation under Chapter 7, then it is advisable that you get a bankruptcy appraisal report drawn up by an experienced appraiser before you file.
It is in your best interest to get a property valuation done before you decide to file Chapter 7 or go into debt repayment plan under Chapter 13. Having a current, accurate home valuation before you begin litigation will give you some advance insight into your chances of being awarded a debt discharge approval. If the equity in your home is high enough to trigger a sale by your trustee, you can save yourself disappointment by rethinking you plan prior to filing a bankruptcy suit.
If the judge feels that the litigation appraisal lacks proper analysis and is not defensible then you could find you have to pay back your debt under the Chapter 13 bankruptcy plan. That is why it’s critical to work with a knowledgeable bankruptcy appraisal expert. Together with your attorney, Sandy Spring Home Appraiser can advise you of the best course of action based on a verifiable analysis of your home’s value.
Filing for Chapter 7 bankruptcy is considered better in most cases, as you can usually keep your property. A portion of all outstanding debts– like a ‘second mortgage’– is discharged. Unless you get a bankruptcy appraisal carried out by a state certified real estate appraiser you will not know whether or not you qualify for it. Only after the appraiser carries out a full financial and home valuation will he be in a position to suggest which form of bankruptcy you should consider. A Chapter 7 bankruptcy is also quicker, provided the judge approves of the asset valuation submitted to the court by your team.
If you are filing for Chapter 7 bankruptcy then the appraisal will inform you as well as the creditor that certain properties you own can be exempted from being used to pay creditors’ claims. In case you have an earlier bankruptcy discharge, then based on your income, expenses and amount of debt you could find you are not eligible for bankruptcy under Chapter 7. You will only be able to find this out once the licensed appraiser has assessed your financial position completely and honestly. Any appraisal that is not professional will not pass muster before a bankruptcy judge. When you work with Sandy Springs Home Appraiser, you will receive a detailed, custom written report that your bankruptcy appraiser is prepared to defend in court on your behalf.
Appraisals are sometimes necessary when determining the secured status of a claim under section 506(a) and (b) of the bankruptcy code, or when avoiding a judicial lien under section 522(f).
Under section 506, a secured claim (e.g. a mortgage, an equity line or a tax lien) is only secured to the extent of the value of the property. For example, a house with a first mortgage balance of $400,000 and a second mortgage balance of $50,000 that is worth only $385,000. A bankruptcy appraisal would be used to make the case that the second mortgage is unsecured, and therefore its lien can be removed and it is treated as a general unsecured claim, which is much lower on the pecking order.
There are many nuances and caveats to how this works, but generally, a bankruptcy appraisal is only necessary where value is likely to be in real dispute. This is when you or your attorney needs to hire the services of Sandy Springs Home Appraiser to estimate the fair market value of the home. In cases where the value makes a difference, having a qualified appraiser who can give clear testimony can be extremely important. The bankruptcy appraisal should include a well-supported, professional report that is defensible in court. State and federal laws require that the appraiser and the bankruptcy appraisal process must be independent from any influence, coercion or pressure. This ensures that the appraiser remains a truly independent third party.
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