Debtor Attorney: Valuation Frequently Asked Questions
(click questions for answers)
1) Why are these values different from the wholesale values (from N.A.D.A. and KBB) we have been using for the past several years?
Up until the Bankruptcy Reform Act of 2005, an overwhelming string of case law had determined a vehicle's liquidation value was the appropriate standard for redemption in a Chapter 7 case. The new code, via 11 U.S.C. 506 (a) (2), replaced this with the following:
“If the debtor is an individual in a case under chapter 7 or 13, such value with respect to personal property securing an allowed claim shall be determined based on the replacement value of such property as of the date of filing of the petition without deduction for costs of sale or marketing... replacement value shall mean the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined.”
As the N.A.D.A. and KBB books use values based on vehicles post-reconditioning and in ready-for-sale condition, they do not represent the purpose of the new code and its intent of "...considering the age and condition of the property at the time value is determined." As a result, they have been replaced with more accurate valuation services.
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2) How do the values in Manheim Market Reports compare to other traditional guidebooks such as N.A.D.A. and KBB?
It is not uncommon to find differences between MMR values and guide books. MMR prices are based exclusively on millions of actual sales. The computer programs that compute the averages are completely neutral, without editorial opinion or bias. MMR's programs do not use statistical interpolation to compensate for an insufficiency of data. Guide books, which do not have access to the same amount of data as MMR, use editorial expertise and limited market observations to arrive at prices. Sometimes they are right. Sometimes they are not.
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3) Why are these values often lower than what you see on a dealership's lot?
These retail values include a standard markup added to the wholesale value. Dealers often spend several hundred, even thousands of dollars reconditioning a car to make it more attractive to sell. Additionally, dealers allow for negotiating. Since the Bankruptcy Reform Act very clearly states the redemption value is to consider the specific car in the current specific condition, we do not add for such allowances as they are not representative of the car as it is currently. However, in most cases, we will use actual dealer advertisements to support the retail values we send you.
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4) What if the creditor objects to the value filed in my motion?
Our litigation support team stands ready to help you defend the values we provide to you. Simply call us as soon as you receive the objection and we will arm you with the tools necessary for a successful valuation hearing or creditor direct settlement.
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