Valuation of car with equity, loan remaining, and extensive modifications/improvement

[jazzop89]

Here is a specific scenario:

I have a car valued by the book at $14K. I owe $8K in loan payments. I have made extensive improvements to the car (>$10k in engine, gearbox, suspension, brakes. It is a collectible, limited-edition, 2004 model that is already selling on the used market for more than it sold for new (>$20K). Comparable cars with the mods that I have made sell for >$30k.

1. How does the court reconcile book value vs. market value?
2. How do extensive modifications influence the value?
3. I will not liquidate the car. I will pay the remaining loan off. How does the equity in the car affect my case?

If you have specific knowledge about FL or NJ law, I'd appreciate it.

[despritfreya]

You have to be honest in completing your schedules. If your vehicle has been modified and that modification has enhanced the value beyond the blue book you have to disclose, disclose, disclose. HOWEVER the value is "liquidation" value. Take the sentimental value out of the picture. (What can you get for it if you had to sell it "today"?. Finding the perfect buyer for what you think is a "special vehicle" is not the standard.)

Having said that, if the vehicle's equity exceeds your allowed exemption and you do a Chapter 7 the Trustee can do one of three things: a) Allow you to quickly "purchase back" the non-exempt value or b) hold an auction sale to which you are free to bid and sell the vehicle to the highest bidder. Once sold the lien is paid, you are give your exemption and the balance is used to pay the Trustee and creditors. The third option is to abandon the asset as not having any real value to the estate. This is done if the non-exempt equity is "of inconsequential value".

If the vehicle's non-exempt equity is simply too much for you to quickly pay then you should not do a Chapter 7. You can file either a Chapter 11 or Chapter 13 and pay the non-exempt value to your unsecured creditors over the life of your Plan.

I cannot comment of the availability of the exemptions as I do not practice in Fl or NJ.

[jazzop89]

I'm not talking about sentimental value. I'm trying to figure out how to reconcile three different methods of valuing the car: the "book" value, the current market price (which is double the book value), and the remaining loan value (which is half of book).

[newbie2]

I'm not talking about sentimental value. I'm trying to figure out how to reconcile three different methods of valuing the car: the "book" value, the current market price (which is double the book value), and the remaining loan value (which is half of book).

Don't bother with the loan balance, that is not the true value of the car. Book value won't do you any good either, by your own admission. Resale value is what you need to find out so that you can be honest on your BK schedules and exempt as much of it as you are allowed. Good luck to you.

[chrisdfw]

Your modifications aren't really worth anything in the eyes of the trustee, they see a car and would want to sell it quickly, so its worth for what it would sell at ina reasonable short time period, not to the collector. It is probably only worth the book value in the eyes of the trustee and court. Don't worry about the modifications in most cases they just don't bring back value when you sell. Book value is supposed to be close to market value.

If you listed it for sale what would you expect to get for it? How much would a dealer give you, how much would a dealer sale it for?

Value is very very subjective, don't cheat or lie, but you don't have to value it for the maximum you would get under ideal circumstances. Look in the newspaper perhaps, check ebay, craigslist, etc.

[HHM]

In that type of scenario, you would probably go with Book Value. The trustees typically sell these things at auction (regular car auction attended by dealers). Depending on the car, the modifications may or may not be an issue.

In a situation like this, if your goal is to keep the car, you need to be "honest" about the value but still put up obstacles to the trustee. The issue is, how much exemption you have relative to the equity. If FL, I think the exemption is only $1,000, so you are probably screwed.