CBS Asset Valuation & Exemptions 3 — Questions and Answers
Question 1: A debtor exempts a vehicle worth $8,000 using the federal motor vehicle exemption of $4,450 and the federal wildcard exemption. The wildcard is $1,475 plus unused homestead. The debtor has no homestead. What is the maximum vehicle equity the debtor can protect?
- $5,925 (Correct answer)
- $4,450
- $8,000
- $7,000
Correct answer: $5,925
The motor vehicle exemption ($4,450) plus the base wildcard ($1,475) totals $5,925 in protected equity.
Question 2: Under 11 U.S.C. § 541(a)(5), an inheritance received within how many days after the petition date becomes property of the bankruptcy estate?
- 180 days (Correct answer)
- 90 days
- 365 days
- 60 days
Correct answer: 180 days
Property acquired by bequest, devise, or inheritance within 180 days after filing is included in the bankruptcy estate under § 541(a)(5).
Question 3: A debtor's ERISA-qualified pension plan contains $500,000. How is this treated in a federal opt-out state bankruptcy?
- Excluded from the estate entirely under 11 U.S.C. § 541(c)(2) (Correct answer)
- Included in the estate but exempt under § 522(d)
- Partially included based on the debtor's vested percentage
- Included in the estate and subject to trustee distribution
Correct answer: Excluded from the estate entirely under 11 U.S.C. § 541(c)(2)
ERISA anti-alienation provisions satisfy § 541(c)(2), excluding qualified retirement plans from the estate altogether, not merely exempting them.
Question 4: When a trustee uses the 'orderly liquidation' method to value inventory, which factor most distinguishes it from forced liquidation value?
- It assumes adequate time to find willing buyers at reasonable prices (Correct answer)
- It assumes an immediate auction with no marketing period
- It uses wholesale replacement cost as the floor
- It applies a standard 40% discount to retail pricing
Correct answer: It assumes adequate time to find willing buyers at reasonable prices
Orderly liquidation assumes a reasonable marketing period and a willing seller, producing higher values than a forced or distress sale.
Question 5: Which of the following assets is NOT excludable or exemptible under any provision of the Bankruptcy Code regardless of state law?
- Non-ERISA deferred compensation with no anti-alienation clause (Correct answer)
- IRA accounts up to the statutory cap
- ERISA-qualified 401(k) plans
- Education savings accounts under § 529
Correct answer: Non-ERISA deferred compensation with no anti-alienation clause
Non-ERISA deferred compensation lacking anti-alienation restrictions cannot rely on § 541(c)(2) exclusion and may have limited or no exemption under state law.
Question 6: A Chapter 7 trustee believes a debtor's declared value of $15,000 for jewelry understates true value. What is the trustee's most appropriate first step?
- Retain a certified appraiser to obtain an independent valuation (Correct answer)
- File an objection to exemption immediately without further evidence
- Sell the jewelry at auction to establish market value
- Accept the declared value and close the estate
Correct answer: Retain a certified appraiser to obtain an independent valuation
An independent professional appraisal provides the evidentiary foundation needed before filing a formal objection to exemption or value.
Question 7: Under § 522(o), a debtor's homestead exemption may be reduced if the debtor converted non-exempt assets into homestead equity within ten years with intent to hinder, delay, or defraud creditors. What must the trustee prove?
- Actual fraudulent intent, not merely constructive fraud (Correct answer)
- That the conversion occurred within two years before filing
- That the homestead was purchased after the debts arose
- That the creditors received no value from the converted assets
Correct answer: Actual fraudulent intent, not merely constructive fraud
Section 522(o) requires actual intent to hinder, delay, or defraud; constructive fraud based solely on insolvency is insufficient.
CBS Asset Valuation & Exemptions 3
A debtor exempts a vehicle worth $8,000 using the federal motor vehicle exemption of $4,450 and the federal wildcard exemption.
The wildcard is $1,475 plus unused homestead.
The debtor has no homestead.
What is the maximum vehicle equity the debtor can protect?