Expert: Mark J. Markus- California Bankruptcy Attorney - 9/2/2009

Question
QUESTION: Hello Mr. Markus,

I am a resident of California considering filing chapter 7. Is it correct that a couple's home must have no more than $75,000 in equity to be not included in the BK?  Real estate comps have a wide range of values, some less, some more. I found 2 recent sales of houses our size (in our development) that sold for amounts that would help our position. Just how extensive do the comps have to be to support our equity position? We'd like to keep the house.  Thank you very much for your assistance.

Sincerely,
Eric

ANSWER: The homestead exemption for a California married couple is $75,000, but you must include the asset and any debts associated with it in any bankruptcy case.  The exemption protects the equity in the property, not the requirement to "include" it.

I suggest to my clients that they get 3 brokers' opinions from brokers who have signs up in the area as to value and that is usually pretty accurate.  Ultimately, the value is whatever someone is willing to pay for it.  You just want to get an idea of what it's likely worth so you can assess whether it's likely to be sold by the Trustee in your case.

If you would like a free consultation, please visit http://www.bklaw.com/consult/



---------- FOLLOW-UP ----------

QUESTION: Thank you for your reply, Mr. Markus,

With that in mind, how does one know whether there is no more than $75,000 worth of equity when there's a range of POSSIBLE values? Who ultimately decides which to use: a higher comp that says that we'd have to give up the house... or 2) A lower comp that says we'd get to retain the property? Since comps only reflect POSSIBLE value to the ultimate buyer, who decides which value is used? We don't want to be suprised with, "Too bad... too much equity... you lose the house since you already filed Chapter 7."  We want to be able to make the decision to go to Chapter 13 if needed. Make sense?

Thank you very much for your assistance,
Eric

Answer
Well, first of all, assuming you're eligible, you can always convert your case to a Chapter 13 whenever you want, so that's a non-issue.

As far as who decides the value, the market decides that.  If the Trustee can find a buyer for sufficiently more than the exempt equity in your property, then he/she can seek to sell the property in a Chapter 7 case.   If it's a marginal amount, you can always offer to purchase the Trustee's interest in the property and save him/her the cost of marketing it for sale. There's always some risk if the estimated equity is close to the exemption limit.