Today in Riverside Bankruptcy Trustee Todd Frealy’s hearing calendar there was a debtor who had a house. The house was valued in his petition for a certain amount. When Trustee Frealy reviewed the petition he ran a “zillow.com” appraisal on the property. The value on the zillow.com was higher than was listed in the petition. This is a common occurrence as the web based valuation service are estimates. The web sites are rough guesses on what the property is actually worth.
To counter this problem, Trustee Frealy asked the debtor if the Trustee’s real estate broker could call the debtor to do an interior inspection of the property. The Trustee has certain real estate brokers he uses that have an understanding of the area and values for real property. Trustee Frealy is trying to determine the value of the house. The debtor has protected a part of equity of the property using an exemption. The Trustee wants to see if he can sell the property over and above the amount of the exemption and the realtor’s cost of selling the property.
If the trustee can sell and make enough money to pay a portion of the creditors, then the Trustee will sell the real property and pay the debtor the exemption amount, pay the realtor and then pay a portion of the creditors.
In addition, Trustee Frealy asks the Debtor to provide him with a copy of the most recent mortgage statement in order to see how much is owed against the real property. The Trustee also asked for a copy of the insurance agains the property to show that the property is insured.
Practice Pointer: When you prepare a petition for your client, ask your client for a copy of the mortgage statement to determine how much is owed against the property. This will allow you to fill out the petition. This will also help if the Trustee asks for a copy from your file.