The Chapter 7 Trustee Challenging an Asset's Value

 Posted on January 31, 2026 in Chapter 7

When you file Chapter 7 bankruptcy in Texas in 2026, you must list all your assets and their current values. You also claim exemptions to protect property from being sold by the trustee. But what happens when the bankruptcy trustee believes you undervalued something you own? What if they claim it’s worth more than you say it is?

This situation is more common than many people realize. If you have had this happen to you, don’t panic. Work with an experienced Schertz, TX bankruptcy attorney from the Law Offices of Chance M. McGhee. 

How Do You Know the Value of Your Assets in Bankruptcy?

The starting point for asset values is what you list on your bankruptcy schedules. These forms ask for the current value of everything you own. When you sign your bankruptcy petition, you make this declaration:

Under penalty of perjury, I declare that I have read the schedules filed with this declaration and that they are true and correct.

This means your values need to be honest and reasonably accurate. You are not an appraiser and courts do not expect perfect valuations. However, you must make good faith estimates based on what items would actually sell for in their current condition.

What Does the "Current Value" of an Asset Mean?

Current value typically means fair market value, which is what a willing buyer would pay a willing seller. For household goods and personal items, think about garage sale prices. Used furniture, clothing, and electronics usually have very little cash value, even if they cost a lot when new.

For larger assets like vehicles and real estate, you can usually find more objective information. Online valuation tools can give you good estimates for cars and trucks. Real estate values can be researched through county appraisal district websites and recent comparable sales in your area.

For unusual or valuable items like collectibles, jewelry, or specialized equipment, a professional appraisal may be worthwhile to accurately estimate the value. 

How Does a Bankruptcy Trustee Find Out What Your Assets Are Really Worth?

The bankruptcy trustee has several ways to gather information about your property values beyond just reading your schedules.

Questions at the Meeting of Creditors

About a month after you file for bankruptcy, you must attend the Meeting of Creditors. The trustee can ask you questions under oath about your assets, including how you determined their value. These meetings usually last less than 10 minutes for straightforward cases.

The trustee might ask for details about specific items or request proof of how you arrived at a particular value. If something catches the trustee's attention, this meeting is where concerns usually surface first.

Professional Appraisals

The trustee can arrange for a valuation professional to examine your property and provide an opinion about its worth. Sometimes the trustee asks you to take an item to an appropriate specialist. Other times, the specialist comes to see it in person.

Physical Inspection

The trustee has the legal right to inspect anything you own. In most Chapter 7 cases, trustees never actually look at your property in person. However, this right exists and can be exercised if the trustee has concerns about valuation.

What Happens When the Trustee Thinks an Asset Is Worth More?

If the trustee concludes that something is worth more than you disclosed, several outcomes are possible.

The Exemption Still Covers the Higher Value

Texas has generous bankruptcy exemptions under Texas Property Code Sections 41.001 and 42.001. For example, Texas allows single filers to exempt up to $50,000 in personal property and families to exempt up to $100,000. The homestead exemption is unlimited for properties meeting size requirements.

Even if the trustee determines your car is worth $15,000 instead of your estimated $12,000, the vehicle exemption under Texas Property Code Section 42.002 still protects it. One personal motor vehicle per licensed household member is completely exempt, regardless of how much it’s worth.

Changing Your Exemption Strategy

You and your bankruptcy attorney usually have the right to change up your exemptions if you need to. If one or two items turn out to be worth more than expected, your lawyer might look for different exemptions that work better for your situation. Texas bankruptcy filers can choose between state and federal exemptions, and sometimes switching to the other set solves the problem.

The Value Is Too Small to Pursue

Even if the trustee's valuation exceeds your exemption amount, the difference might not be large enough to justify action. The trustee must pay you the exempt portion if they sell the asset. Only the excess goes to creditors after deducting sale costs and trustee fees.

For example, imagine you claimed a $5,000 exemption on an item the trustee values at $6,500. The trustee would have to pay you $5,000, pay auction fees, advertise the sale, and handle the transaction. The net return to creditors might be only a few hundred dollars, making it not worth the effort.

Disagreements Go to the Bankruptcy Judge

If you and the trustee cannot reach an agreement about the value of an asset, the bankruptcy judge makes the final decision. The judge weighs evidence from both sides and determines the actual value. This rarely happens because litigation is expensive and most valuation disagreements get resolved through negotiation.

How Can You Avoid Valuation Problems in Your Bankruptcy Case?

Working carefully with your bankruptcy lawyer when preparing schedules prevents most valuation disputes. Be thorough in listing everything you own and honest about values. If you are unsure about something's worth, research comparable items or get a professional opinion before filing.

Remember that overvaluing assets can be just as problematic as undervaluing them. If you list an item at an inflated value and claim an exemption for it, you might waste an exemption amount that could protect other property. Your attorney will help you strike the right balance.

Call a Kerrville, TX Chapter 7 Bankruptcy Attorney Today

Valuing your assets and claiming exemptions correctly are critical steps in your Chapter 7 bankruptcy. Mistakes can result in losing property you thought was protected or facing allegations of fraud.

Our Schertz consumer bankruptcy lawyer will guide you through every aspect of the bankruptcy process, including protecting your property with exemptions. Call the Law Offices of Chance M. McGhee at 210-342-3400 to discuss your bankruptcy case in a free consultation.