Personal Property Values

[Lightning]

I'm curious about the policy regarding personal property values in relation to bankruptcy filings. If one can claim BK exemptions using "garage sale" values, then I would think one could not ask for more than that in the event of an insurance claim (flood, fire, hurricane, earthquake, theft, etc.)

[newday]

I think in terms of an insurance settlement, the value is generally the cost to replace the damaged or stolen items.

In terms of bankruptcy, garage sale prices are listed because if the items were liquidated that's likely the cost the items would net.

[Lightning]

I suppose I just find it strange that one's belongings would be worth a certain value if liquidated in bankruptcy, but they would be worth much more if they were completely destroyed by a natural disaster or an act of God.

[hhou812hh]

I see where you're going with this Lightning, but it's apples & oranges. Peoples personal belongings, cars, trucks, just about anything is only worth what someone is willing to pay for it. No matter how good the condition someone's couch is I would only give that person maybe 50 or 100 bucks. Why should I buy it for near full price when I can just buy new? That's how the trustee looks at it as well.

Insurance is a business that makes it's money by offering us some protection for a fee. Some policies only cover what their client paid and others more expensive policies cover the replacement cost.


One really has nothing to do with the other.

[pink_amulet]

[sunshine08]

First of all, lightening you seem to toot the "having" of insurance and savings and not living beyond yor means. DOn't forget about "the depression." People put their hard earned money into the bank, investing etc. Do you keep all of your money in a lock box hid somewhere or in the bank? If you keep it in the bank, what protects it there? If you keeo it at home, what haooens if it is stolen or your house is burned down? Even if you "owe" no money, (we all owe money, nobody has everything prepaid, upcomng groceries, power bill etc.) have wads of savings, in the bank, in a hole in the yard with a coffee can full of money, in a safe bolted to the floor that is guaranteed to guard against 500,000,000 degress of heat, etc. You still are reliant on other things, insurance, charity, etc. if something tragic were to happen. You are just in a lot better position to stay afloat than the rest of us, you would still be at the mercy of insurance companies, banks not holding your money due to technicalities, thieves, fire or natural disasters. You or no one else can predict the future, you can't prepare for every unforseen thing. Insurance companies have tiny small print, there is no way you know every little loop hole that insurance companies use as a reason not to pay or limit the amount they pay, even people that work in insurance companies don't know every little loophole. Have you ever gotten a check that the bank "held" your money over thru no fault of your own?
I think that the courts use garage sale prices as a guide, it is hard to place a "value" on things. Do you have a favorite outfit, picure, object? Who decides the worth of anything???
To me I certain things that are "priceless", to my husband "my priceless items" would be the amount that my husband would pay to get rid of my items. It isn't really relevant, lits like opinions. In the grand scheme of things my opinion means crap to you if you don't like it, but for the most part the sun is coming up the next day either way. (well 99% chance anyway, if the world ends it doesn't really matter)
If you had the time, you would want to sell your home thru a realtor, they could advertise etc., their vested interest in this is to make a commission. The courts aren't going to sit and wait for a buyer to come to them with the "best" offer. It is easier to have an auction or liquidation sale. I would ask you if you have ever purchased anything on clearance (my favorite word) or at a store closing liquidation sale??? Probably not you, but the point is the same. Take furniture the mark up on furniture is upwards of 4-500 %. SO waht does half price mean, a litle less profit, sure aren't getting a loss as we see it.
I brought a bed, Bob Timberlake to be specific, from a store "in bankruptcy" for less than $500, when I looked it up on the internet, was selling for over $2500, same bed (& beforeyou ask not at a scratch and dent place either, a nice upscale furniture store). But if I was in a hurry for a quick buck, even at a yard sale I would be pressed to get $100. Also at auctions, it is the auction company that makes out like a bandit, say the same bed was sold at auction for $100 you have to subtract the auctioner's company's fee, so (don't know their commission) but say 25%, the debtor would only receive $75 towards the debt.
Now, if my house burned down & if I could reasonably show the purchase price vs the replacement value (replacement value and actual value vary due to demand and other criteria). Dependant upon my insurance policy, I could be compensated for the full replacement cost of an item or a percentage of the full replacement cost of the item minus a percentage of depreciation.
Look at the price of gas, gas is gas, its content doesn't change but the purchase price does, Gas, believe it or not has gone down here upwards of up to .15. Do you have a explanation for that other than supply vs demand????? What is the difference? If we did not need or buy gas, or it was easily replaceable and available, you could practically give it away.
Lightening I am not trying to rain on your parade but you make many of us feel very defensive, but thank you for asking questions about things that you don't understand in a more tactical way lately. Sorry to be such a long reply, I just wanted to fully explain how I feel.

[StaciMM]

This is something that is changing w/ the new law though I don't know all the details...

Under the 'old' you used garage sale prices because that is about what you could get if you did actually try to sell everything. If the trustee were to take it all and try to raise $$ for the creditors, they would not get alot for my used sofa/loveseat... We got it 3-4 years ago from my inlaws when they got new furniture, and they had owned it for at least 3-4 years, probably longer.

[WorkinOnit]

Depends on the type of policy.
Replacement cost policy (expensive) or ACV Actual cash value policy (most common type).

Quote below from an insurance discussion board:

Let's begin by remembering why we buy insurence. The purpose of insurance is to cover a loss that you can't afford to pay yourself. So the goal is to have all the big losses covered while keeping your premiums to a minimum.

The part of the policy that Lynn is referring to concerns the loss of her personal property. She's found that there's two types of coverage that she can purchase. One is called "actual cash value."

Suppose her home is burglarized and they steal her television. If she had cash value coverage her insurance company would pay her what the TV was worth.

If you've ever tried to sell used furniture you'll remember that prices are a fraction of their original cost. And, that's the trouble. Lynn's probably not going to want to replace all her stuff with used items. A more likely result is that Lynn would end up buying a new TV and have to pay the difference herself.

At that point, she would wish that she had purchased "replacement cost coverage." That would have paid for a new replacement for her television. Clearly a much better deal under the circumstances. And, easier on her credit card!

Yes, the replacement cost coverage is more expensive than cash value coverage. But, think about why we have insurance. If you can afford the higher premium, it's worth it. Remember our goal is to avoid the big unaffordable losses.

[sunshine08]

ALso kinda like a hot ticket item, tv,stereo, new game for playstation. Why 6 months down the road the items aren't as expensive as they were when they first came out, nothing has changed, so replacement cost on those are less than the purchase price.

[HHM]

Honestly, I don't see what is so confusing...

Its important to keep in mind that you "pay" for insurance. You are paying a premium to have your property valued at a certain cost in the event of loss. I.e., for most things you insure, the value of the item is replacement cost for insurance purposes.

However, when it comes to the debtor/creditor relationship...remember, the creditor cannot use the item of personal property (i.e your big screen TV), they have to sell it (liquidate it) in order to get cash to pay down the debt you owe. The only way to liquidate the item is to sell it at auction or other type of market for the item, essentially, a garage sale. So, if a creditor decides to take non-exempt personal property to satisfy a debt...the creditor is only entitled to what they can sell it for.

Thus, if your big screen TV was stolen and its insured, you may very well get a check from the insurance co. for $2500, if a creditor takes your big screen to sell to satisfy a debt you owe that creditor, they will likely only get $500 for that set. Thus, when you file bankruptcy, the liquidation value of of the big screen.

Again, I don't see what is so confusing about having different values for things for different purposes, think of real estate. Assuming you live in a state with property tax, the assessed value for the purposes of property tax is usually quite different (and lower) than the fair market value. The replacement price (i.e. the cost to rebuild your home) that you insure with a homeowners policy is different than both the assessed value and the fair market value.

[AAAArt]

You need to be careful when you buy insurance, what you are buying. For example, my ex-wife worked for an insurance co, many years ago. A client totalled a new BMW (23 miles) on it. Insurance co, wanted to pay him $12,000 less than he paid for it because that is what a "used" BMW sold for. Problem was, he had financed over 90%. Most companies are like this. That is why, in recent years, a "gap insurance" policy is being offered. To cover the difference.
As to your original question, I think that you are just trying to stir the pot.

[sunshine08]

He has been doing that with an extra large spoon!

[quest42]

Here is another, almost parallel, odd example:

I bought a used 1998 truck in 2001 for $10,000.

My truck is insured... If it gets totalled, the insurance pays book value -- I think... about $3,500 -- as of today.

But, my 4-year vehicle loan (rule of 78 - bummer!) has another year left to pay off... a balance now of about $4,000.

So, I think I could "redeem" the truck by paying $3,500 - the trade-in value, right??? (IF I had that money laying around... my homestead/wildcard exemption is $18,675 - California system 2... my total assets are less than $10,000...)

IF I could redeem, then it seems the lender loses $500? Right?

IF the car was totalled today, the insurance would pay $3,500 and then I would have to make up for the loan balance with another $500... yes?

Any comments?

[LostinMi]

I know with my house insurance I pay an additional "fee" to have "replacement" value added to my policy. So, then, the actual value of the item isn't what is insured, it's the value to replace the item.