Cite as: Keith M. Lundin, Lundin On Chapter 13, § 36.8, at ¶ ____, LundinOnChapter13.com (last visited __________).
Schedule A to Official Bankruptcy Form 6 requires the debtor to list all real property in which the debtor holds any legal, equitable or future interest, including all property the debtor owns as a cotenant, community property or property in which the debtor has a life estate or other limited interest. The property must be first described and then located by address. The nature of the debtor’s interest in the property should be described, for example, as “fee simple” if the debtor owns the property outright. If there are co-owners or cotenants, the percentage of ownership in the debtor should be stated. The debtor must also indicate with an appropriate letter (H, W, J or C) whether the property is owned by the debtor individually, by the debtor’s spouse, jointly with the debtor’s spouse or as community property. All interests of the debtor in real property should be listed however contingent or disputed.
The “current market value” for each interest of the debtor in real property, without deduction for any secured claim or exemption, must be carefully calculated and entered on Schedule A to Official Bankruptcy Form 6. The values listed by the debtor may be used to determine the amount of secured and unsecured debt for eligibility purposes.1 The current market value listed on Schedule A may be binding on the debtor in subsequent valuation litigation.2 The values listed in Schedule A may be used by the debtor and may be used against the debtor at confirmation to determine the present value that must be paid under 11 U.S.C. § 1325(a)(5)3 and to accomplish the best-interests-of-creditors calculation in 11 U.S.C. § 1325(a)(4).4
Coming up with accurate market values for interests in real property in Schedule A is easier said than done. Few Chapter 13 debtors come into counsel’s office with property appraisals in hand. If the property was recently purchased, listing the purchase price and the date of purchase is one approach. If the debtor wants to estimate the value of real property, counsel should probe for information about how the debtor is making the estimate. There is some natural tendency for homeowners to overvalue their own homes. Overvaluing of real property in Schedule A can have devastating consequences for confirmation of a Chapter 13 plan.5 On the other hand, undervaluing can get the debtor into trouble before confirmation if creditors move for relief from the stay and lack of equity becomes an issue.6 Moderation is a good rule of thumb for listing the current market value of real property in Schedule A. Typically, this current market value will be based on a conversation between the debtor and counsel and there will be little time for gathering information beyond what the debtor says. In the unusual case where the debtor has several real property interests, counsel may need to insist on other information, to include ordering appraisals before the debtor is committed by listing a current market value in Schedule A.
If the debtor’s interest in real property is encumbered, the amount of the mortgage or security interest should be listed. Every security interest in real property identified in Schedule A should also appear as a secured debt in Schedule D to Official Bankruptcy Form 67 and should be accounted for at Lines 25B, 26, 47 and 48 of Official Form B22C.8 The total amount of current market value shown on Schedule A is also reported on the Summary of Schedules.
1 See § 13.1 [ Use of Statements and Schedules in Eligibility Calculations ] § 14.3 Use of Statements and Schedules in Eligibility Calculations.
2 See §§ 67.3 [ Preconfirmation Valuation Disputes ] § 57.6 Preconfirmation Valuation Disputes and 105.1 [ Valuation, Claim Splitting and Dewsnup ] § 76.1 Valuation, Claim Splitting and Dewsnup–110.1 [ Valuation after Rash ] § 76.6 Valuation after Rash.
4 See § 160.1 [ In General: Plan Payments vs. Hypothetical Liquidation ] § 90.1 In General: Plan Payments vs. Hypothetical Liquidation.
5 See §§ 105.1 [ Valuation, Claim Splitting and Dewsnup ] § 76.1 Valuation, Claim Splitting and Dewsnup and 113.1 [ Full Payment of Allowed Secured Claim ] § 78.1 Full Payment of Allowed Secured Claim.
6 See § 83.1 [ Application of § 362(d)(2) in Chapter 13 Cases ] § 64.5 Application of § 362(d)(2) in Chapter 13 Cases.
7 See § 35.5 [ Schedule D—Secured Claims ] § 36.11 Schedule D—Secured Claims.
8 See §§ 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21 Form 122C-2: Disposable Income Calculation and 476.1 [ Local Standards: Housing and Transportation ] § 95.3 Local Standards: Housing and Transportation.