I spoke to Chapter 7 Riverside Trustee Howard Grobstein and asked him what are the issues that he is seeing as a trustee these days. Mr. Grobstein said that since house prices are increasing, attorneys are not keeping up with the changes. He routinely sees lawyers listing real property values at significantly less than what the market will allow.
The typical scenario is the attorney will use CCP 703’s to exempt the vehicles while valuing the equity in the house at below market values so as not to have to use the CCP 704’s more generous homestead exemptions. What happens is that Trustee Grobstein then asks a broker for a “Broker’s Opinion of Value” (See previous post on this BOV). The Broker bases the value of the residence on current market values. At this point the equity is shown to be extensive. The Attorney must then shift the exemptions to protect the equity in the house from CCP 703 to CCP 704.
After the exemptions are changed, then the vehicles are exposed to the bankruptcy estate as the CCP 704 exemptions are not as generous for protecting autos. Trustee Grobstein then will either sell the autos or make a deal in order for the debtor to buy back the equity in the vehicles.
For the last several years, house prices have been depressed. Most people had the value of the their homes plummet during the recession. Now though, house prices are increasing and must be watched when calculating the exemptions. This problem tends to occur when the client retains the lawyer six month or a year ago and the petition is started several months ago, but not filed until now. The value of the house taken six to nine months ago is different than it is today.
For these reasons, run the property through Zillow.com before filing the case to give a “ball park” figure for the real property before you calculate the exemptions.