During an individual bankruptcy, all personal property must be identified and valued. Schedule B of the official bankruptcy forms specifically requires information for all “collections or collectibles.” Valuing collectibles during bankruptcy can get tricky, and properly valuing collectibles can mean the difference between keeping and losing the property. Some collections, like Beanie Babies or Precious Moments Figurines, have poor resale value. On the other hand, gun collections have good resale value.
In many cases, the bankruptcy trustee knows little or nothing about the collection or its condition, and will initially rely on the debtor to give a good faith estimate of its worth. The value of the collection should be a “quick sale value,” which is akin to what other similar items in the same condition are selling for in a “quick sale” marketplace like an auction or eBay.
In most cases, offering the trustee some evidence of how the collectibles are valued will end the inquiry. For instance, if prices are documented from recent transactions on eBay, or an “expert” provides a statement of fair market value, the investigation into the value of the collection may end. On the other hand, stating that a collection has an “unknown” value only leads to more questions and closer scrutiny.
Take, for example, the recent corporate bankruptcy filing by Frederick’s of Hollywood. Included in the assets of this case is a large collection of celebrity under garments worn by stars such as Marilyn Monroe, Robert Redford, and Madonna. The five page list of this collection included in the bankruptcy schedules describes each item, but states that its value is “unknown.”
The Frederick’s case is a Chapter 11 bankruptcy, which is a corporate restructuring, and many of these items may be sold at auction to the highest bidder. In contrast, most personal collections included in a Chapter 7 or Chapter 13 bankruptcy case may be protected from sale at auction due to federal or state legal exemptions. By properly valuing collectibles, an individual debtor may apply these legal exemptions and, in many cases, keep the entire collection.
If you are considering filing for bankruptcy please call the experienced attorneys at Fears Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to fears@fnlawfirm.com.