Why You Need an Appraisal before Filing for Bankruptcy

If you’re a homeowner and you ever find yourself in the unfortunate situation of having to file for bankruptcy, you would do well to get a bankruptcy appraisal. It’s important that you have an accurate market value of all your assets – and your home is one of the biggest. Make sure you choose a qualified bankruptcy appraiser, as this is a critical process, and there are a lot of legal issues coming into play.

The court will definitely ask for proof of asset values, and obviously this applies to your house too. In fact, you will be required to provide proof of your income, debts and liabilities. A thorough and unbiased bankruptcy appraisal is the best way to arrive at your home’s market value. This is a sound way of proving to the court that the house value as documented in your bankruptcy application is accurate.

In 2005, the Bankruptcy reform legislation made bankruptcy appraisal critical; based on this, the Court may approve your plea for a Chapter 7 liquidation bankruptcy or a Chapter 13 debt repayment bankruptcy. The latter means you formulate a debt repayment plan with your creditors. This way you could get to keep your home, since you are not looking for a complete liquidation of your assets. You could also probably have your second mortgage or other debts be acknowledged as unsecured debts, if, after subtracting the balance of the first mortgage, there is no equity left. Of course, eventually, it all depends on what view the presiding judge takes.
Preferably, the appraiser should be someone who is from your area or someone who is familiar with it, because only then can you hope to get a fair and accurate estimate. You also need to ensure that the appraiser is experienced in bankruptcy appraisals and that they have a good reputation; their credibility could become the deciding factor for a judge to accept or reject the valuation of your house.

You could ask friends and family, or even local real estate brokers, or search online, to find the right appraisal service.

The appraiser will conduct a thorough examination of your home – the condition it is in, any repairs and upgrades you have made to the house, the features your house has, and also check recent sales of comparable properties to arrive at an estimated market value. You would do well to be honest as to the reason for the appraisal; tell them that they may need to testify in court, and to plan ahead for this.