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Schedule B: How to Value Assets in Bankruptcy

by Adam Mack

The official instructions for Schedule B don’t include any direction on how to determine the value of assets in a Kansas bankruptcy.  As a result, the methods for valuing assets varies depending on a combination of circumstance, statute, case law, and legal best practices.

Valuing an Asset with a Security Interest
For example, if an item of personal property is being used to a secure a loan, then the “value of property subject to a security interest is determined in light of the purpose of the valuation and the proposed disposition or use of the property.” 1 The most common loan with a security interest is a car loan.  If the person filing bankruptcy was going to surrender his or her car, then according to the quote above it should be valued at its replacement cost. But a quick search of NADA or Kelley Blue Book (KBB) makes it clear that there is no one way to value a vehicle.  This is where we get guidance from the courts.2  They have determined that the “private party” value is acceptable when the creditor doesn’t provide any other evidence of the value of the vehicle. In other words, “retail” in the Bankruptcy Code does not equal “retail” on the KBB website since the Bankruptcy Code “retail” makes allowances for the age and condition of the property, something the KBB website “retail” does not.

What if the person filing bankruptcy is going to reaffirm the loan and keep the car?  It’d still be valued in the same way.

Valuing an Asset Owned Free and Clear
If an asset is owned free and clear, then valuing it is generally less complicated, especially for non-luxury items. The rule is the same as for security assets: the value is the amount it would cost to replace that exact item from a retailer.  Since most of the personal property listed on a Schedule B are used (by the person filing bankruptcy), that “retailer” would be a second-hand retailer such as a pawn shop or thrift store.  So in a bankruptcy, your clothing would be valued at the same amount it would cost to buy your entire wardrobe from a thrift store, not the price you paid for your clothes when they were new.

The value of the vast majority of one’s assets will not be challenged by the trustee, but certain luxury, collectible, or other specialty items will raise red flags.  Jewelry, furs, art, sports memorabilia, guns, and “toys” like boats or recreational vehicles will likely be given at least a closer look by the trustee.  Especially if you have any of these items, a good Kansas bankruptcy lawyer will be invaluable in helping protect as many of your assets as possible.

The Most Important Part
When it comes to valuing assets, what should be a simple process can quickly become a complex headache. Having a qualified Kansas bankruptcy attorney walking you through it is one of the best choices you can make.

1. 11 U.S.C. § 506(a)(1)↩ 2. For example, see In re De Anda-Ramirez, 359 B.R. 794, 796 (B.A.P. LOth Cir. 2007)↩


These articles are for general informational use and do not constitute legal advice. Since laws change over time, it’s possible some articles are out of date and for that reason, we make no representation that the articles are fully accurate. For actual, up-to-date legal advice (including a free consultation), please contact us!