The Value of Valuing Personal Property in Bankruptcy

If you file for bankruptcy, you also must file a Schedule B, listing all personal property in which you have any legal or equitable interest. This is important because you cannot protect what is not listed in this schedule. The description must contain sufficient detail so that the trustee and creditors have a good idea regarding what the property is, what its condition is, and so forth – this will help to determine what could happen to it prior to the bankruptcy discharge. You also need to make clear about your interest in the property since this will impact the value included in Schedule B, which leads to the point of this schedule: it must provide the current value of your interest in the property, without adjustment for secured claims or exemptions.

You must include all property, even if it would not be in the bankruptcy estate (which places it under the trustee’s control). The list includes causes of action for which you can sue, government grants for which you are eligible, security deposits, earned income tax credits as well as tax refunds that you will receive, and support obligations payable to you.

Property has to be listed so you can protect it. You will exempt the property using available exemptions — not doing so allows the trustee to sell it to pay creditors whom you owe. Without a listing and a description that is detailed, an exemption could be denied because the trustee cannot get a good idea of the property’s value – again, the potential for a sale exists. If you forget to list something, you may be able to amend the schedule to include it, but you should take care to have a complete inventory as of the date of filing. Scheduled property that the trustee has not administered by the end of the bankruptcy is abandoned to the debtor so you will not lose it, but unlisted property can cause you many problems, including losing it.

After you have the list of personal property, you need to review it and place values on items in the list. This doesn’t mean that each item has to be valued. Some things that would have an individual value below $575 and would be considered household goods can be combined into one category – for example, you could value pots and pans or silverware or your clothing in groups (although you should give some idea of how much is in these groups since details matter here). With property such as furniture, appliances, and clothing, remember that they tend to lose value quickly, and the value to list is the current fair market value, not replacement values. Basically, you look at the price that they reasonably could bring at a garage sale. Since they wouldn’t raise much money, a trustee – who seeks to raise funds to distribute among creditors – is unlikely to go to the expense of, essentially, holding this garage sale.

Personal property of greater value (such as expensive jewelry or artwork) could be worth more than the value that you can exempt. Property in these categories might be sold during a bankruptcy, which is a consideration before filing but cannot be “forgotten” in Schedule B if you do file. Also, you might want to have these appraised before they’re listed since they are not common, ordinary items like the property mentioned in the preceding paragraph.

A few other categories of personal property merit some mention here. One consists of your financial account, including checking accounts. The value as of the date of filing is needed. If you have written checks that have not been cashed yet, this is not a problem. You simply would exempt the higher value. However, never add funds after the account is valued on the date of filing because you don’t want to list a value that is too low on Schedule B.

Additionally, intangible personal property must appear on the schedule. You need to pay attention to detail in your description of this type of property because valuation often is difficult. As an example, if you have a cause of action against someone and seek a monetary award, the value to include is not the amount that you are seeking because you may not receive this. You have to adjust the value based on the odds that you will win and be awarded that amount – in law, there is no such thing as a sure thing. Beyond this reality is the possibility that, while you may be awarded monetary damages, you could have trouble collecting the judgment. The value in Schedule B should be reduced to reflect such reasonable possibilities. If the value is too hard to estimate with any accuracy, you might list it as “unknown” while providing an accurate description so that you can attempt to exempt it while the trustee has an opportunity to try to place a value on it.

The last category, for now, consists of property that is not part of the bankruptcy estate, which only includes non-exempted items and is under the control of the trustee. Because Schedule B requires the inclusion of all your personal property, everything appears in it. A common example is an interest in an ERISA-qualified pension. Generally, this is not part of the bankruptcy estate, but, if you take this position, you should include a reference to a statute that protects it in the schedule. Meanwhile, just in case the trustee doesn’t agree with your interpretation, you could claim an exemption in Schedule C “in the alternative” for additional protection.

With all personal property in Schedule B, you want to be as thorough and accurate as possible with descriptions and valuations. You don’t want to face the possible loss of property because you neglected to list it, and you also want to exempt as much of the listed value from the bankruptcy estate so that the property can remain yours after the bankruptcy has ended.