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Protect Your Home in Bankruptcy, Not Just its Dollar Amount

By L. Jed Berliner, Springfield & Marlborough, MA Ban

You want to protect all of your home, car, or other non-cash asset but exemptions are limited to fixed dollar amounts.   The Supreme Court says you can.

Exemptions are stated in fixed dollar amounts.  Protecting your home can be difficult because it is hard to value.  You do the best you can, but there’s always some risk that a trustee will get a wild-eyed real estate broker with a pie-in-the-sky listing price and threat of marketing your home.  You do NOT want the trustee to sell your home and give you the protected dollar amount in cash.  You do not even want the trustee to market your home.  You want to save your home.  What to do?

In Schwab. v. Reilly, 130 S.Ct. 2652, 2668 (2010) the Court guided us on how to protect the full value of an asset.  It encouraged debtors to state “full fair market value (FMV) or “100% of FMV” to trigger the 30 day deadline for a trustee to object.  No objection equals full 100% protection.  The major point was to give the trustee fair notice of your intent to claim the full fair market value and not the maximum fixed dollar amount available.

If the trustee files an objection which is sustained, this means that the court ruled your property is likely worth more than the exemption allows and you’ll have to figure out what exemption to cut in an amendment.  You didn’t really lose anything; you took a shot and it didn’t work out.  The main point is that you only have to worry for the first 30 days to see if an objection will be filed.

You hit a home run if the trustee doesn’t object in time, or if the objection is denied.  That happens when the Court agrees with your estimated value as being within the exemption.  Your home, or other asset, is not at any risk whatsoever.

Your claim for 100% of the asset must be based on a good faith valuation of the asset, of course.  Otherwise nasty things could happen.

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Full post as published by Bankruptcy Law Network on November 01, 2010 (boomark / email).