Expert: Mark J. Markus- California Bankruptcy Attorney - 4/20/2006

Question
I have been researching bankruptcy on the internet and trying to find out if we can file under the federal exemption law or not.  How do we determine the equity in our home?  Do we take the amount from our property tax statement and subtract the loan(s) and possibly also subtract selling/transfer costs.  I'm asking because we may be pretty close the amount allowed under federal exemption depending on how it is calculated.  Thank you.

Answer
Equity is calculated by taking the fair market value of the property, then subtracting all liens and encumbrances (e.g. mortgages, tax liens, judgments, etc.) and, depending on the Trustees in your jurisdiction, you can subtract an additional 6-8% of the market value to cover estimated costs of sale.  

To determine the fair market value, the best way is to get an appraisal done by a board certified appraiser.  Otherwise, you can have a real estate broker pull comparables and give you a range of value. The numbers on your property tax statement have no relation to the value of the property.