Whether a bankruptcy case needs an appraisal depends on the chapter and on what is actually being contested. Schedule A/B asks you to state a value and the method you used, and nothing requires a formal appraisal to do that. Where an appraisal earns its cost is when the number is going to be scrutinized.
What this assignment is scoped to do, stated before you engage.
Lien stripping is the first. If the home is worth less than the balance of the first mortgage, a wholly unsecured second mortgage or HELOC can be stripped off and treated as unsecured, which effectively eliminates it. That option does not exist in Chapter 7, and it lives or dies on the valuation.
The best-interests test is the second. Under 11 U.S.C. 1325(a)(4), the plan must pay unsecured creditors at least what they would have received in a hypothetical Chapter 7 liquidation. Non-exempt equity in the home drives that figure directly, which means it drives the plan payment.
In most consumer Chapter 7 cases the homestead exemption covers the equity, the trustee has nothing to pursue, and no valuation is needed. Ordering an appraisal in that situation is spending money to answer a question nobody is going to ask.
It changes when there may be non-exempt equity. Then the trustee has a reason to look hard at the number, and an unsupported estimate is the weakest thing to be holding.
For Schedule A/B disclosure, the petition date. Where valuation is contested it depends on the purpose: 11 U.S.C. 506(a) directs that value be determined in light of the purpose of the valuation and the proposed disposition or use of the property.
On Chapter 13 lien stripping most courts use the petition date, but there is a split of authority and some courts use the plan's effective date instead. Counsel confirms the controlling date before I begin. It is not a detail, it is the assignment.
A desktop assignment is permissible in bankruptcy and is sometimes the right scope. What governs is the court's directive and what counsel requires.
Some appraiser websites state that a trustee expects a full narrative report and not a desktop. That is not a rule. It is marketing presented as procedure. Tell me what the court and counsel require and I will scope the assignment to it.
Nothing in the bankruptcy rules prescribes a format. What matters is that the opinion is credible and the support can be followed by whoever reads it next.
In my judgment a narrative report often serves these cases better than a lending form, because it explains the reasoning rather than filling boxes designed for a mortgage underwriter, and for unusual property narrative is frequently the only format that fits. That is a professional view, and it yields to whatever the court directs.
A trustee is entitled to disagree with any opinion of value, and sometimes has reason to. No appraiser can promise otherwise, and one who does is telling you something they cannot deliver.
What a report can do is make the reasoning transparent enough that a disagreement has to be argued on the evidence rather than simply asserted. That is the whole objective.
It depends on the chapter and on what's being contested. Schedule A/B asks you to state a value and the method you used, and nothing requires a formal appraisal — a good-faith estimate can rest on assessor records, an agent's opinion, or an online estimate.
Where an appraisal earns its cost is when the number will be scrutinized. Your attorney will tell you whether your case is one of those.
Usually, if real property is involved. Two things in Chapter 13 turn on what the house is worth.
Lien stripping is the first. If the home is worth less than the first mortgage balance, a wholly unsecured second mortgage or HELOC can be stripped off and treated as unsecured — effectively eliminated. That option doesn't exist in Chapter 7, and it lives or dies on the valuation.
The best interests of creditors test is the second. Under 11 U.S.C. § 1325(a)(4), your plan must pay unsecured creditors at least what they'd have received in a hypothetical Chapter 7 liquidation. Non-exempt equity in the home drives that number directly, which means it drives your plan payment.
Sometimes, but often not. In most consumer Chapter 7 cases the homestead exemption covers the equity, the trustee has nothing to pursue, and no valuation is needed.
It changes when there may be non-exempt equity. Then the trustee has a reason to look hard at the number, and an unsupported estimate is the weakest thing to be holding.
Yes. A desktop assignment is permissible and is sometimes the right scope.
What governs is the court's directive and what your attorney requires — not any industry claim about best practice. Some appraiser websites state that a trustee "expects a full narrative report and not a desktop." That isn't a rule. Tell me what the court and your attorney require and I'll scope the assignment to it.
No. Nothing in the bankruptcy rules prescribes a report format. What matters is that the opinion is credible and the support can be followed.
In my judgment a narrative report often serves these cases better than a lending form, because it explains the reasoning rather than filling boxes designed for a mortgage underwriter — and for unusual property, narrative is frequently the only format that fits. That's my professional view, and it yields to whatever the court directs.
For Schedule A/B disclosure, the petition date. Where valuation is contested, it depends on the purpose — 11 U.S.C. § 506(a) directs that value be determined in light of the purpose of the valuation and the proposed disposition or use of the property.
On Chapter 13 lien stripping, most courts use the petition date, but there is a split of authority and some courts use the plan's effective date instead. Your attorney confirms the controlling date before I begin, because it determines the entire assignment.
The debtor's attorney, the trustee, or the debtor directly, depending on the case and the chapter.
The engagement determines who my client is and who the report is prepared for, so it's worth getting right at the outset.
A trustee is entitled to disagree with any opinion of value, and sometimes has reason to.
What a report can do is make the reasoning transparent enough that any disagreement has to be argued on the evidence rather than asserted.
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You will reach Scott directly. Expect questions about intended use and effective date before a fee is quoted.
Discuss a bankruptcy assignment