Bankruptcy & Real Estate Appraisals

The largest exemption provided under most state statutes is provided for primary residences. The homestead exception, not surprisingly, generates more objections in bankruptcy courts than any other exemption category. Because of rapid home appreciation in recent years, creditors seem charmed by the prospect of a prize, if only they may overwhelm an unsuspecting debtors with frivolous motions. For debtors, the best defense is full disclosure and precise legal compliance.

Many debtors hope to low-ball appraisals to include all equity with the homestead exemption., In practice the appraisal method accepted by trustees and courts is somewhat different than used by most other real estate professionals. The highest nor lowest price is applicable, yet all appraisals must also include the cost of bankruptcy administration before a trustee may profitably deduct expenses and pay creditors the proceeds of equity above the homestead exemption value.