Bankruptcy Appraisals: FMV? OLV? FLV?
(by David Maloney) The topic of bankruptcy and bankruptcy appraisals is a complicated one. Be that as it may, a rudimentary understanding of the bankruptcy processes, the type of debtor (individual or business), and the options available to the debtor depending on the type of bankruptcy filing sought (Chapter 7? 11? 13?) is helpful to the appraiser intent on completely identifying the “appraisal problem” including the type and definition of value to be developed when undertaking a bankruptcy appraisal.
Bankruptcy is a legal procedure designed to protect both an individual or business that can’t meet its financial obligations and to protect the creditors involved. The process of bankruptcy requires the debtor to create a report illustrating the “value” of their assets. In order to get a true reading of the value of the individual or business personal property involved, an appraisal is at times, but not always, necessary.
All bankruptcies are governed by Title 11 of the U.S. Code (Bankruptcy Code) and are processed through Bankruptcy Courts — part of the system of Federal courts. The Bankruptcy Courts of the 94 Federal judicial districts were created by Congress just to hear bankruptcy cases and make decisions about disputes between debtors and creditors.