How Zillow and Trulia Can Ruin Your Bankruptcy

Bankruptcy attorneys are hired to navigate debtors through the murky waters of the bankruptcy court. One concern for a debtor is when they own a home that is worth more than what is owed to a lender. Some debtors unwarily rely sites like Zillow or Trulia to determine their property values.  Zillow and trulia are too unreliable.  As a result, debtors filing bankruptcy can ruin their bankruptcy because their property values are higher than what Zillow or Trulia believes.

How You Can Keep Your Home In Bankruptcy: Exemptions for Residence
Under current bankruptcy rules, debtors are allowed to keep up a certain amount of home equity.  However, this amount of equity should not exceed your jurisdication's limit.  In California, bankruptcy courts allow debtors to keep between $75,000 and $150,000 of home equity.

For example, if you own a home that is worth $100,000, and you owe a lender $75,000, you have $25,000 in home equity.  In California, bankruptcy courts allow you to exempt all the equity in the home from the creditors.  However, by choosing to exempt your home equity, you reduce the amount of money that you can exempt other items, such as car equity and cash savings accounts.  Sometimes by choosing to save the equity in a home, a debtor will have to let the bankruptcy court take other personal property.

Let us look at another example.  You own a home that is worth $100,000.  You owe $99,000 to a lender.  Thus, you have $1,000 in equity.  Most California bankruptcy attorneys will choose not to use house exemption to protect this equity so that they can protect more equity in other property, such as car equity and cash savings accounts.  Under this scenario, the $1000 of equity will be protected under the "wild card" exemption.

Can You Trust Zillow or Trulia?
Therefore, it is important to have accurate house valuation.  What is the best way to determine house value?  Hire an appraiser.  Unfortunately, an appraisal will cost $350.  Another reliable source would be to have a competent Realtor tour your house and compare your house to homes that have sold in your neighborhood recently.  While less reliable than an appraisal report, a Realtor report should be pretty accurate a fraction of the price of an appraisal.

How about Zillow?  Or Trulia?  Why not just look at home values through these symstems because they are free?  Bankruptcy courts have held time after time that Zillow is not credible evidence of value.  (In re Phillips, 491 BR 255, 260, n.7 (Bankr. D. Nev. 2014).)

Debtors relying on Zillow are often surprised when the trustee tells them that their homes are worth more than what Zillow says.  Typically, debtors can recover from this surprise by changing their exemptions so that they choose the house exemption.  However, often that leads to other personal property as not being exempt.  The trustee is allowed to sell those items for the benefit of the creditors.