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The Chapter 7 Trustee Challenging an Asset’s Value

What happens when your bankruptcy trustee thinks you undervalued an asset? How does the trustee determine what you own and its value? 


Last time, we got into what happens when your asset (“property) and exemption schedules show you have an unprotected asset. In that scenario you own something that is not covered by an allowed exemption. So it is not exempt from the Chapter 7 trustee’s reach.

We mentioned two other scenarios. What happens if:

  • the trustee believes you may have undervalued an asset, or
  • the trustee disputes that an exemption you claimed applies to your asset?

We’ll cover the first of these two today, and the second in our next blog post.

Your Valuation of Assets

The starting point for what your assets are worth is the value you give to them in your asset schedule. That form asks for the “current value” of the property.

You put your signature on a “Declaration” page right below the following sentence:

Under penalty of perjury, I declare that I have read the… schedules filed with this declaration and that they are true and correct.

So the values you give for what you own need to be “true and correct.” That essentially means that you need to be honest and reasonably accurate. You are not an appraiser and are not expected to provide expert valuations. So follow your lawyer’s lead about the valuation standards. For example, the “fair market value” of your household goods can be thought of as what somebody would pay for them in a garage sale. Also, you can get reasonably objective information on the values of larger items like homes and vehicles. Occasionally a professional appraisal may be worthwhile with unusual and more valuable items.

The Trustee’s Sources of Information about Value

Besides looking at your bankruptcy schedules, the trustee can:

1. Ask you about particular items at the “Meeting of Creditors” about a month after you file your bankruptcy case. He or she could ask how you came up with the stated value, and for details about the item. These “Meetings” usually take less than 10 minutes so there isn’t much time for extensive questioning, and often the trustee finds nothing of interest to ask about. But this is where he or she will usually signal a concern about the value you assigned to something.

2. Arrange to have a valuation expert see it and provide an opinion of its value. Occasionally the trustee will have you take something to an appropriate expert, or have the expert come to see it.

3. See the item him- or herself to assess its value. The trustee has a right to inspect anything you own. To be clear, in the vast majority of cases the trustee does not bother to look at ANYTHING of yours. But it’s always a possibility.

If the Trustee Believes the Value Is Higher

If after all this, the trustee believes that the item is worth more than you disclosed, here’s what may happen:

1. The allowed property exemption amount may still exceed and cover the trustee’s value. Then the trustee still has no right to the item.

2. You and your lawyer usually have the right to change the assigned exemption if there is one that covers it better. If one or two items are worth more than you expected, sometimes your lawyer can come up with a different set of exemptions that are now better for you.

3. The trustee’s increased value may be larger than the exemption but still not large enough to be worthwhile for the trustee to liquidate. The trustee would have to pay you the exempt portion if it took and sold the item. Only the amount in excess of that would be available for the trustee to distribute to your creditors. For reasons outlined in our last blog post, there are practical reasons why a trustee may simply not bother to do so.

4. If after all this the trustee and you are still in disagreement about value, the bankruptcy judge can decide the matter. He or she would weigh the evidence and come to a determination about the value. Usually it doesn’t come to this, because it’s a relatively expensive way to decide the matter.


The value you give to your assets is usually accepted as accurate. But your Chapter 7 trustee can get other information to challenge your valuation. Sometimes that can result in the trustee wanting to take something from you that you thought was exempt. Work carefully with your bankruptcy lawyer when preparing your asset and exemption schedules to prevent such problems.


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