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What Is Your Car Worth When You File a Bankruptcy in Arizona? Should You Use a Blue Book, Edmonds, or NADA Value? Or is "Neither" the Best Estimate?

By Joseph McDaniel, Esq.

Value.

It's sort of a philosophical question.

Until you file a bankruptcy. Or try to buy a car. Or to sell a car.

When I worked for Chief U.S. Bankruptcy Judge Caldwell, he told me that an appraisal, of any sort, was an educated guess. Something is worth what a buyer will pay for it.

And we then have knowledge, not a guess, for that moment in time. The moment when the check clears.

Is it worth that much in the future? Well, that becomes a new theoretical question.

Right now Arizona Bankruptcy Trustees normally look at HIGH, PRIVATE PARTY, BLUE BOOK, EXCELLENT CONDITION values when deciding whether to object to automobile exemptions.

There are three values often used in the world, and I found this post floating around on the internet in a forum, and I thought it made very good sense:

The true answer to that question is that neither is the most accurate, as the value of you car is truly based on the consumer demand for that product in your particular area. For instance, a used convertable will not be worth much in the winter in New England, where as a full-sized pickup truck is not worth as much in the south with the higher gas prices. The economy is what really makes or breaks your trade/sale dollar. It's not hard to lose big bucks in your purchase is you don't smart shop to begin with (i.e. a Hyundai isn't worth as much used because that "awesome" 100k-mile warranty is not transferable)

You can use Kbb/Edmunds/NADA for estimates, but make sure that you actually use it for that purpose only. Unless Kelly or Edmunds is going to hand you a check and buy your car from you, don't go die hard on those numbers.

I can say that of the group and the systems by which they determine your car's value; the NADA updates its information every month, where as, Kelly Blue Book only updates twice a year. Edmunds True Market Value is generally in the ball park too.

Also, remember to not over-exaggerate your car's particular value. What that means is the if you're using KBB, for instance, a car with 80,000 miles and somes scratches/dents is never in "perfect" condition, as Kelly even explains that less than 5% of all cars actually fall into that category. Be educated, but don't forget to be realistic as well.

another interesting internet post from the same source: 

I've found NADA (http://www.nada.com/) to be more accurate than either KBB or Edmunds.
working loans at a bank, i will say that NADA blue book is the most accurate. that's what the dealers and banks use. Edmunds and Kelly BB are just for consumers so they can get an "idea" of how to price or buy used vehicles. NADA is really the top source you want to use. and if you're trading, keep in mind that consumer's NADA is a little different from the bank or dealership. Low book or trade isn't what you'll get, but closer to wholesale or about $1000-2000 LESS than low book. :(

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I'm going to give this topic some serious thought, and consider whether the most appropriate value for an automobile may be something other than high, excellent quality, blue book.

I'll keep you posted.

Full post as published by Arizona Bankruptcy Attorney Blog on January 21, 2011 (boomark / email).