We will focus on such an aspect of bankruptcy procedures as evaluation of the debtor’s property to be sold at auction.
All creditors understand that, ideally, bankruptcy should end with the settlement of their claims against the debtor. The funds for such repayment appear to the insolvent debtor only as a result of the sale of the property belonging to him to other persons. In bankruptcy, such a sale takes place in the form of trades, which are conducted by the arbitration manager.
However, even in the case of the sale of all the property of the debtor, the money obtained may not be enough to meet the requirements of all creditors. Such a risk always exists. It can be minimized only by monitoring the establishment of the initial value of the property put up for bidding, because undervaluing at this stage significantly reduces the chances of lenders for the full repayment of their claims.
The initial value of the property put up for bidding can be determined with the help of an independent appraiser (namely, “may”, but not “obliged”). Attracting an appraiser to bankruptcy is sometimes mandatory, such cases are specified in the law.
The activity of the appraiser in the bankruptcy procedure is slightly different from other cases of the provision of valuation services. There is no special legal regulation at the federal level for the provision of valuation services in bankruptcy. Therefore, the assessment of the value of property in bankruptcy cases is governed by the general provisions of the law on appraisal activity and federal standards of assessment. Nevertheless, a number of nuances in this activity are available and worth paying attention to.
The object of evaluation is not limited by anything:
No one can predict what property belongs to one or another debtor, and therefore it is almost impossible to unify the approach to assessing the property of a debtor in bankruptcy. At the federal level, a number of valuation standards have been developed that establish special rules for the valuation of a particular type of property (real estate, stocks and shares, intangible assets, and so on). Therefore, the appraiser, faced with the need to evaluate the object for which there are special rules, uses them along with the general provisions of the law on appraisal activity.
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Type of determined value:
Before proceeding to an assessment, an assessment task is formulated for the appraiser, which is an integral part of the assessment contract. The assessment task contains all the necessary information, instructions and questions for the evaluator. In particular, it is especially important to indicate in the assignment what kind of value should be assigned to the appraiser. As part of the bankruptcy procedure, as a rule, either the market or the liquidation value of the property is established. The liquidation value is always lower than the market value, because it implies taking into account the tight deadlines for the realization of the object of valuation. The market value is established when there are no extraordinary circumstances, that is, a forced sale. The very essence of the bidding implies a limited period of sale and compulsory alienation, therefore, the liquidation value of the appraised object is more often established.
Terms of implementation:
As can be seen from the previous paragraph, the final value of the value depends on the timing of the sale of the property. Thus, great importance in the evaluation of property in bankruptcy acquires a period remaining until the end of the bankruptcy proceedings, in which it is necessary to implement the object of evaluation at the auction. The larger it is, the higher the price you can realize the property of the debtor, since in the presence of a large time period for sale it is possible to establish the market value of the property, which always exceeds the liquidation value.
Photo: GLOBAL LOOK press / Christian Ode
Obligation to attract an appraiser
As previously noted, in some cases the involvement of an appraiser in determining the value of the property to be sold is obligatory that is, the right of the arbitration manager to involve an appraiser is transformed into his responsibility. The law states several such cases:
The debtor is a unitary enterprise;
The debtor is a joint-stock company, more than twenty-five percent of the voting shares of which is in state or municipal ownership. Arian Foster Authentic Jersey