Fair Market Value of an Asset
The fair market value (FMV) of an asset is described as the actual price at which the item would sell for in today’s marketplace. Therefore, the FMV is not what you hope the asset is worth, or what the asset appraised for two years ago, or what the asset might possibly be valued at once significant repairs are done to it. Rather, the FMV of an asset is the amount you realistically believe you can get for the item “as is” in our current economic climate.
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Why is the fair market value of an asset such an important feature in the St. Louis bankruptcy world? Here are two examples:
(1) Let’s say you own a home in St. Louis County, and you have a current balance of $150,000 existing on your mortgage. You believe that the fair market value of your home is $250,000 (in other words, you feel that if your house was sold in the open market, it would bring in at least $250,000 at sale). In such a scenario, there appears to be $100,000 of equity (the difference between what is owed on the loan and the value of the asset). If this is in fact the case, then the Chapter 7 Trustee in a St. Louis Chapter 7 would seek to have the real estate liquidated (so that the unsecured creditors could receive a share of the value) or the Chapter 13 Trustee in a St. Louis Chapter 13 would require that at least $100,000 be guaranteed to the unsecured creditors (an amount that would be spread out over the length of the repayment plan). But if in fact the value of your home is closer to the amount you currently owe (or even less than what you currently owe, a circumstance that is not unusual in this economy), then the Trustee can demand nothing be paid to the unsecured creditors.
(2) Assume you own an automobile that is paid in full, and therefore has no loan against it. Let’s further assume that the car is a 2006 Honda Accord Hybrid. Such a vehicle receives a Kelly Blue Book value of between $10-15,000. You believe that the FMV is well below that range because it has been driven in excess of 200,000 miles, has several mechanical problems, and was involved in a few major accidents from which damage still exists on the body. In such a scenario, the value of your particular car would undoubtedly Blue Book well below the presumed FMV for this type of automobile. This is important information for a St. Louis bankruptcy attorney, because the state of Missouri allows for a $3,000 exemption in any automobile. If there is any equity above that exemption level, then it is possible that the Trustee in either a Chapter 7 or 13 would want you to make some sort of compensation for it.
As these examples illustrate, it is vitally important to assign the most accurate (or at least closest approximation) dollar value to the asset in question. The St. Louis bankruptcy lawyers at The Law Office of Jennifer Alter-Rieken have the necessary experience and insight to help you determine the fair market value of your property, and make sure that the asset is kept safe. Our staff is ready to accomplish this goal, and set you in the direction towards financial freedom.