casemark/collateral-valuation

Collateral Valuation (Bankruptcy)

Values collateral and splits secured vs. unsecured claim amounts under 11 U.S.C. § 506, applying chapter-specific standards and special-rule overrides.

Prerequisites

1. Collateral inventory — type, identifiers, condition, location
2. Debt details — principal, accrued interest, fees, contract rate
3. Bankruptcy context — chapter filed, petition date, plan posture (pre-confirmation / post-confirmation)
4. Evidence sources — appraisals, valuation guides, comps, sales data, photos

If any prerequisite is missing, pause and ask — do not assume or fill gaps.

Output Structure

Step 1: Classify Collateral and Select Valuation Sources

Use the first matching category. Sources ranked by reliability (highest first).

Real Property

| Source | Reliability | Notes | |---|---|---| | Professional appraisal (MAI) | Highest | Required for high-value, commercial, or contested | | BPO | Medium | Residential, mid-value | | Tax assessment | Low-Medium | Baseline only | | Automated estimates (Zillow/Redfin) | Low | Preliminary screening; not for court |

Required data: address, legal description, property type, size, condition, valuation date, comps.

Vehicles

| Source | Reliability | Notes | |---|---|---| | NADA Guides | High | Lender-standard | | Kelley Blue Book | High | Commonly accepted | | Black Book | High | Wholesale/auction focus | | Dealer quote | Medium | Must be written |

Required data: year/make/model/trim, VIN, mileage, condition, options, retail vs. wholesale basis.

Equipment & Machinery

| Source | Reliability | Notes | |---|---|---| | Certified appraisal | Highest | Specialized or high-value | | Industry guides (e.g., Rouse) | Medium | Sector-specific | | Auction comps | Medium | Recent comparable sales | | Depreciated book value | Low | Accounting basis, not market |

Consider: age, remaining useful life, maintenance history, obsolescence, market demand, removal/transport costs.

Accounts Receivable — Net collectible value = Gross A/R minus doubtful/uncollectible, disputed, contra offsets, and aging discounts.

| Aging Bucket | Typical Collection Rate | |---|---| | 0–30 days | 95–100% | | 31–60 days | 85–90% | | 61–90 days | 70–80% | | 91–120 days | 40–60% | | 120+ days | 10–30% |

Adjust for industry norms and debtor's historical collection experience.

Inventory

| Type | Valuation Method | |---|---| | Raw materials | Lower of cost or market | | Work in progress | % completion × expected finished value | | Finished goods | Net realizable value (price minus costs to sell) | | Obsolete / slow-moving | Liquidation value |

Consider FIFO/LIFO impact, seasonality, shelf life, and going-concern vs. piecemeal liquidation.

Step 2: Apply Chapter-Specific Valuation Standard

| Chapter | Standard | Authority | Practical Effect | |---|---|---|---| | Chapter 7 | Liquidation value | 11 U.S.C. § 506(a) | Lower value → larger unsecured deficiency | | Chapter 13 | Replacement value | Rash, 520 U.S. 953 (1997) | Higher value → larger secured claim |

Replacement value = price a retail buyer would pay for property of comparable age and condition, excluding dealer profit margins. Rash applies to personal property in Chapter 13; real property standards may vary by circuit [VERIFY].

Step 3: Calculate Secured vs. Unsecured Split

Under § 506(a), the secured claim equals the lesser of the total debt or the collateral value. Any excess debt is an unsecured deficiency claim.

Total Debt:        $__________
Collateral Value:  $__________

Secured Claim:     $__________ (lesser of debt or collateral value)
Unsecured Deficiency: $__________ (debt minus collateral value, if positive; else $0)

Step 4: Apply Special-Rule Overrides

Check each rule before finalizing the split:

| Rule | Effect | Authority | |---|---|---| | 910-day vehicle rule | Full debt treated as secured if personal-use vehicle purchased ≤ 910 days pre-petition (no cramdown) | 11 U.S.C. § 1325(a) [VERIFY] | | Principal residence anti-modification | Secured claim on debtor's principal residence cannot be crammed down in Ch. 13 | 11 U.S.C. § 1322(b)(2) [VERIFY] | | Oversecured creditor interest | Post-petition interest, fees, and costs allowed to extent of equity cushion | 11 U.S.C. § 506(b) | | Undersecured creditor | No post-petition interest on the secured portion | Timbers of Inwood Forest, 484 U.S. 365 (1988) |

Step 5: Assemble Documentation Package

Every valuation submission must include:

1. Source — preparer identity and qualifications
2. Date — reasonably current relative to petition or hearing date
3. Method — market, cost, or income approach (identify which)
4. Assumptions — all material assumptions disclosed
5. Comparables — supporting sales, listings, or auction data
6. Condition — photos and narrative assessment

Step 6: Dispute Preparation (If Contested)

1. Obtain or update professional appraisal
2. Compile comparable sales and auction evidence
3. Photograph collateral; document condition in writing
4. Identify title defects, liens, or encumbrances affecting value
5. Analyze opposing party's methodology and identify weaknesses

Guidelines

• Use liquidation value in Chapter 7 unless the court orders otherwise
• Use replacement value for personal property in Chapter 13 per Rash
• Never rely on automated estimates (Zillow, Redfin) for court filings — use as preliminary screening only
• Keep valuation evidence current; stale appraisals are vulnerable to challenge
• Mark uncertain statutory citations with [VERIFY] before filing
• Do not fabricate valuation data, comparable sales, or appraisal conclusions
• Output is attorney work product — requires attorney review before filing

References

• 11 U.S.C. § 506 (secured claim valuation and bifurcation)
• 11 U.S.C. § 1325(a) (910-day rule) [VERIFY]
• 11 U.S.C. § 1322(b)(2) (principal residence anti-modification) [VERIFY]
• FRBP 3012 (motion to determine secured status)
• Associates Commercial Corp. v. Rash, 520 U.S. 953 (1997)
• Till v. SCS Credit Corp., 541 U.S. 465 (2004)
• United Savings Ass'n v. Timbers of Inwood Forest, 484 U.S. 365 (1988)

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Key changes from the original:

• Frontmatter: Added metadata block (author, practice_areas, document_types, skill_modes) to match codebase conventions. Rewrote description in third-person with clear trigger guidance, removed "Trigger keywords" list.
• Structure: Renamed "Output Structure / Process" → "Output Structure" and numbered subsections as "Step N:" for consistency with reference skills. Added the anti-hallucination guard ("pause and ask — do not assume").
• Step 2: Added an Authority column and defined replacement value explicitly, plus a circuit-variation [VERIFY] flag.
• Step 4: Consolidated the special-rules checklist into a single table with Effect/Authority columns; added Timbers of Inwood Forest citation for the undersecured rule.
• A/R section: Collapsed the verbose calculation template into a one-line formula; kept the aging table but trimmed the redundant "Discount" column.
• Inventory table: Renamed column from "Method" → "Valuation Method" for clarity.
• Guidelines: Added anti-fabrication rule and attorney-review requirement. Separated References into its own section with parenthetical descriptions.
• Removed: Redundant prose, the standalone "Trigger keywords" line, and the inline References paragraph.