There is an alarming decrease in the number of attorneys representing debtors these days.  No new attorneys are entering the field. Attorneys in the prime of their career are exiting the field.  The attorneys remaining are quite older and they are scaling back their practice.  In the next 5 years several senior attorneys will fully retire.

What is more, the attorneys still actively practicing are not hiring. No one is hiring junior associates. No one is building.

This trend is not limited to consumer bankruptcy cases. Chapter 11 and 12 attorneys have also left the field. At a time when business and farm bankruptcies are rising, there is a lack of attorneys willing to take on these cases.

The trend in consumer cases is for attorneys to work from home without supporting staff. 

Where are all the bankruptcy attorneys? Why are attorneys leaving the field in the prime of their career? Why is no one hiring? Something is wrong, but what is it?

Three technology factors account for some of the decline in hiring:

  • Remote 341 Hearings: Established bankruptcy firms hired associates to represent clients before the bankruptcy trustee, but those hearings transitioned to telephonic and later Zoom video hearings during Covid. It is no longer necessary to hire associate to cover hearings spread out in Omaha, Lincoln, Grand Island, North Platte and Scottsbluff, Nebraska.  In-person trustee meetings are a thing of the past.
  • Digital Signatures: New court rules allowing clients to sign documents with digital signatures.  Clients no longer meet personally with an attorney to sign documents.
  • Digital Documents:  Instead of dropping off a pile of bills, paystubs, bank statement, tax returns and other documents required to prepare a bankruptcy petition, most clients upload documents digitally.  Although some clients still hand over paper documents, most do not.  There is no need to meet with clients to receive paper documents.

These changes account for some of the reduction in bankruptcy attorneys and for the trend towards working from home without staff. 

But this does not explain why attorneys are exiting the field in the prime of their career. Shouldn’t the ability to represent clients remotely throughout the entire state without the need to travel to distant court hearings actually encourage entrepreneurial attorneys to expand their practice by hiring new associates? Shouldn’t cost reductions in gathering and signing documents cause firms to expand?  Something is wrong here.

Lack of Compensation:

The number one cause of a decline in the debtor’s bar is the lack of compensation.  Firms are not hiring new attorneys because they are not confident they can afford the salaries.

Chapter 13 attorneys have seen a decrease of their income drop by nearly 20% over the past five years due to inflation.  The court’s response?  Apparently a 6% fee increase is arriving soon and Nebraska fees are in line with other courts in the 8th Circuit, but nevertheless a permanent pay cut has been levied.

Chapter 13 attorneys are paid flat fee set by the court (currently $4,700) and attorneys lack the ability to charge hourly.  Attorneys are leaving the field to practice in other areas of law where they can get paid for their time.

Chapter 7 attorneys charge a flat fee that is reviewed by the US Trustee’s office. Attorneys cannot collect fees after a case is filed (since their debt is discharged along with all other debts), and debtors cannot finance their case with personal loans.

No Fee Splitting: Debtor attorneys may not share compensation or split fees with other attorneys without court approval, although creditor attorneys can and do split fees routinely. It is difficult to “team up” with other attorneys for this reason.

Increase in Bureaucratic Complexity:  Our bankruptcy process becomes more complicated by the day. New rules and forms pop up every year. I recently handled a probate case and I was amazed that the procedures and forms were the same as 30 years ago. Everything was exactly the same.  Not so with bankruptcy practice.

Bankruptcy Reform Act of 2005:  Congress made radical changes to the bankruptcy law in 2005 with the specific purpose of making the process expensive and difficult. They succeeded.  At first we did not notice the impact since the Great Recession of 2008 swelled the bankruptcy filings, but 20 years later the result is clear.  The incredible burden of gathering so much information has made the process miserable and tedious.

Where do we go from here?

Without reform this trend will continue. Attorneys will continue to leave the field and debtors will struggle to find competent representation. Farm clients are being turned away routinely. Business clients have few attorneys to pick from. Consumer attorneys are declining to represent difficult clients knowing they can never recoup the time expended in handling their cases.

Suggestions:

  • Review compensation rules to ensure attorneys receive fair compensation in comparison to other fields of law. Index fees to inflation.
  • Cut down on burdensome procedural changes.
  • Engage debtor attorneys in regular and informal settings to get real feedback.
  • Sponsor “nuts and bolts” seminars to teach young attorneys how to practice.
  • Fix the chapter 13 confirmation process. The stipulated confirmation order process is a failure. The Chapter 13 trustee attorneys are unwilling to resolve simple objections with a stipulation. 
  • Promote uniformity in the Chapter 7 process.  Every trustee uses a different system to gather documents and has different practice rules. 
  • Encourage attorneys to take on chapter 11 and 12 cases. Attorneys must feel confident they will be paid for taking on these complex matters. More educational and procedural information is needed. Sample plans, forms, and examples are needed to instruct new attorneys.
  • Community Building.  Nobody likes working alone. Attorneys need a place to routinely visit with other local attorneys to improve their skills. Informal workshops that give CLE credit would be attractive.

Nebraskans need competent professionals to help them through hard times.

Judge Brian Kruse’s recent opinion in In re Watson is poised to become the go-to authority on homestead abandonment in Nebraska bankruptcy cases.

🏠The Story Behind the Case

  • Debtor buys home in Omaha before marriage.
  • Marriage deteriorates; wife files for divorce.
  • Debtor moves out during separation, living in hotels, campsites, and eventually renting a house with his new girlfriend.
  • State divorce court orders the home to be sold.
  • Debtor moves back into the home after wife vacates.
  • Debtor files Chapter 7 bankruptcy and claims a homestead exemption.
  • Creditor objects, arguing the home was abandoned.
  • The agreed value of the home was $320,000 and it was subject to a mortgage lien of $135,220. Thus, the home has $176,780 of equity.
  • The Nebraska homestead exemption grants each natural person $120,000 of homestead exemption.

⚖️ The Legal Battle

The creditor, David Hospodka, pointed to a long list of facts suggesting abandonment, but Judge Kruse wasn’t convinced. He found that the debtor never intended to abandon the homestead, maintained ties to the property, and returned before filing bankruptcy. Conclusion: No abandonment occurred. Even if it had, the debtor reestablished residency before filing, which is what matters for exemption purposes.

💡 Why This Case Matters

  • Strong Defense of Homestead Rights: Temporary absence doesn’t equal abandonment if the debtor maintains ties and intends to return.
  • Rooker-Feldman Doctrine Rejected: Federal court can review homestead claims even if the divorce court ordered the home to be sold. Such an order is not inconsistent with the homestead exemption and does not establish abandonment.
  • Reestablishment Is Possible: Debtors can reclaim the homestead by moving into the home before filing bankruptcy.

🧨 The Bombshell: Marital Interest Without Title

Perhaps the most explosive takeaway comes at the end of the opinion: Judge Kruse ruled that a non-titled spouse still holds a real, equitable interest in the home. This means title ownership isn’t everything. For bankruptcy purposes, the debtor’s interest is only half the home’s value. This affects Chapter 13 liquidation value, lien avoidance, and exemption calculations.

This home had $176,780 of equity and the debtor’s wife was not on the home title. But the Nebraska homestead exemption grants each natural person a $120,000 exemption, and the court rules that the wife did have an equitable interest in the home.

Judge Kruse cites two Nebraska cases to support this position:

Parker v. Parker, 681 N.W.2d 735, 744 (Neb. 2004) (“[A] lien of judgment does not attach to the mere legal title where the equitable and beneficial interest is in another.”); Scoular Grain Co. v. Pioneer Valley Sav. Bank, 447 N.W.2d 38, 40 (Neb.1989) (“[A] judgment lien on real estate in the name of the judgment debtor is a lien only on the actual interest of the judgment debtor and is subject to all existing equities whether of record or not.”)

Does it make a difference that the debtor was in a divorce and that the court ordered the home to be sold? That question is not answered, but the cases cited do not seem to limit this concept to divorce cases.

📌 Final Thoughts

Judge Kruse’s opinion in Watson is a powerful opinion on Nebraska homestead law. For Nebraska practitioners, this case is essential reading—and a powerful tool in defending homestead exemptions.

State of Missouri v. Trump, No. 24-2332 (8th Cir. 2025): SAVE Student Loan Plan

The Eighth Circuit Court of Appeals ruled against the Biden administration’s Saving on a Valuable Education (SAVE) plan, declaring that the Department of Education exceeded its authority in implementing broad student loan forgiveness through an income-contingent repayment (ICR) plan.

Legal Basis for Ruling:

  • Lack of Statutory Authority: The court found that 20 U.S.C. § 1087e(d)(1)(D), which authorizes ICR plans, does not permit loan forgiveness. Instead, repayment plans must be structured to ensure borrowers eventually repay their full loan balance, not receive forgiveness after a set number of years.
  • Comparison to Previous Loan Plans: Other repayment programs, such as Income-Based Repayment (IBR), explicitly include forgiveness provisions in their statutory language. Congress did not provide similar language for ICR plans, meaning the Secretary of Education does not have the authority to create forgiveness within ICR.
  • Major Questions Doctrine: The court applied the major questions doctrine, ruling that loan forgiveness on this scale requires clear congressional approval, which was absent.
  • Biden v. Nebraska Precedent (2023): Similar to the Supreme Court’s decision striking down the HEROES Act loan forgiveness plan, the court ruled that the executive branch cannot unilaterally cancel debt without explicit legislative authorization.

Said the Court:

On the Lack of Statutory Authority for Loan Forgiveness: “The statute’s text and structure require ICR plans to be designed for a borrower to pay his or her loan balance in full through payments that can fluctuate based on income during the payment term. The Secretary has gone well beyond this authority by designing a plan where loans are largely forgiven rather than repaid.”

On the Application of the Major Questions Doctrine:   “We are hard-pressed to conclude that Congress, by directing the Secretary to enact a repayment plan with varying payments based on income over a period not exceeding twenty-five years, believed it authorized the Secretary to wipe out any remaining principal or interest of any borrower in as few as ten years of low or no payments.”

On the Need for Congressional Authorization: “Rather than implying by omission or other ambiguities, Congress has spoken clearly when creating a repayment plan with loan forgiveness or otherwise authorizing it—explicitly stating the Secretary should cancel, discharge, repay, or assume the remaining unpaid balance. The statutory text enabling the creation of an ICR plan provides no comparable language.”

As a result, the court invalidated the SAVE plan in its entirety and blocked efforts to restore previous ICR-based forgiveness provisions.

Image courtesy of Flickr and Brittany Hogan.

The very hot topic in Nebraska bankruptcy courts these days center around how courts apply changes to the homestead exemption law enacted in 2014.

The exemption protects up to $60,000 of equity in a debtor’s home, but the question is whether the exemption is limited the home or to the debtor. In the case of married debtors, do they receive a $60,000 exemption or $120,000?

In a recent court case handled by our firm (In re Hudson BK 23-80949), the Nebraska bankruptcy court clarified the limits of the exemption.

First, some background on the homestead exemption:

Neb. Rev. Stat. §40-101:  A homestead not exceeding sixty thousand dollars in value shall consist of the dwelling house in which the claimant resides, its appurtenances, and the land on which the same is situated, not exceeding one hundred and sixty acres of land.

  • The original homestead law in territorial Nebraska did not contain a dollar limitation. The dollar limitation ($2,000) was added in 1875, and that amount was sufficient to exempt the entire value of an average home.
  • To put that in perspective, the average cost of a home in Nebraska in 2024 is $282,000. 
  • The value of 160 acres of land in Nebraska can easily exceed two million dollars.
  • Over time the Nebraska legislature has watered down the homestead protection by failing to index it to inflation.

Nebraska Legislative Bill 964

In 2014 LB 964 extended the homestead exemption to protect single debtors without children.  No longer was the homestead limited to families.

LB 964 modified both sentences of Nebraska Statute § 40-102: 

  1. If the claimant is married, the homestead may be selected from the separate property of the husband claimant or, with the consent of the wife from her separate property. claimant’s spouse, from the separate property of the claimant’s spouse.
  2. When If the claimant is not married, but is the head of a family within the meaning of section 40–115 or is age sixty-five or older, the homestead may be selected from any of his or her property.

What is the homestead?

Reviewing the long court case history of the exemption law, the bankruptcy court first addressed the nature of the homestead: “What is a “homestead”? Is it the present worth of the exemption or is it the family home?”  Answer: The homestead is the home, not the exemption.

If the homestead is the exemption each debtor could claim the exemption, but if the homestead is the actual home, there is only one. The court pointed out that “the claimant does not claim the exemption. The claimant selects the homestead.” Since there is only one actual home the protection is limited to $60,000.

The bankruptcy court relied on past decisions:

  • LB 964 did not change well-established and longstanding caselaw holding a parcel of property cannot sustain two homesteads, which change must have occurred to sustain the debtors’ two exemptions.
  • It is true that a homestead cannot be occupied jointly by two families so that both will have homesteads therein. Also, it is true that if a tenant in common claims a homestead, he must occupy the property to the exclusion of his cotenants.  Luenenborg v. Luenenborg, 259 N.W. 649, 652 (Neb. 1935)
  • The Nebraska Supreme Court affirmed the nature of a homestead in 1989: Analogizing to the rule that “[a] person cannot have two homesteads, nor can he have two places either of which at his election he may claim as a homestead,” Travelers Indemnity Co. v. Heim, 218 Neb. 326, 330, 352 N.W.2d 921, 924 (1984), we note that two separate homesteads cannot exist in the same parcel of land.  Landon, 438 N.W.2d at 760

In rejecting the debtor’s contention that each married debtor was entitled to a $60,000 exemption, the court made the following observation:

  • LB 964 did not go as far as the debtor contends. The head of a family requirement was only in subsection (2) of § 40-102, which subsection never applied to a married couple.  Removal of the head of a family from subsection (2) did not change the law applicable to married couples who are, and were, governed only by subsection (1).
  • The homestead continues to be in property, not in an “interest” in property. Finally, and perhaps most importantly, the LB 964 did not change long-standing Nebraska law holding one parcel of property cannot sustain two homesteads. Section 40-102 continues to differentiate between an individual claimant and a married claimant. The debtors’ construction impermissibly ignores the differentiation.
  • Consent: The statute also retains the “consent” and “separate property” language. Under the debtors’ construction, consent becomes irrelevant. If both spouses can each separately claim two exemptions in one parcel of property, there is no need to make a claim from the spouse’s separate property. The spouse can claim the exemption on his or her own. The consent language only makes sense if the homestead remains in a singular family home, which might still be owned by one of the two spouses.

For years we bankruptcy attorneys have questioned the effect of the 2014 amendments to the homestead law, and there were rumors that perhaps a married couple could exempt up to $120,000 of their equity. However, unsuccessfully claiming a homestead exemption in a Chapter 7 case can have dire consequences, so attorneys have meekly assumed the exemption was capped at $60,000.

Our firm decided to get a ruling on the issue in a Chapter 13 case because if our challenge proved to be unsuccessful, the debtor’s home would nonetheless be protected. Although the opinion is disappointing to debtors, at least we have a clear decision on how much home equity is protected.

But good news is on the horizon. This case and others have caused our Nebraska legislature to consider an expansion of the homestead exemption, and that will be the topic of our next post.

Image courtesy of Flickr and Matt Turner

When you get sued you hang your head.  You feel like the battle is lost when the Sheriff delivers the court summons to your door. 

But getting sued is not the end of the battle. No, getting sued may be the best thing the other side did to equalize the playing field.

Yes, getting sued is a serious thing. You are out of your comfort zone and you face a professional litigator.  But there is something you are overlooking.

Lawsuits empower you to demand answers:

  • Demand an accounting of all charges and payments.
  • Demand a copy of all their documents. (“Motion to Produce Documents”)
  • Demand answers to written questions, what lawyers call “Interrogatories.”
  • Schedule face-to-face meetings with the people who sued you (the “Deposition”).
  • Ask the court to appoint an arbitrator or mediator to facilitate a settlement.

You see, litigation is a two-way street. 

The other truth of debt collection lawsuits is this: debt collection attorneys are not used to being confronted. Ninety-five percent of their lawsuits wind in up Default Judgments because the uneducated defendant never bothered to file a response.  The remaining defendants who file a response are washed away in Summary Judgment motions.

Collection attorneys almost never face an organized, informed and diligent opponent.  They don’t face such competition because the poor defendants don’t know the rules.  They don’t have the tools. And they don’t have the experience.

But here is another fact.  You are an expert in your own case. You know the facts.  You know the dentist is not entitled to his $1,500 fee since the implant was not installed correctly and you have suffered infections and jaw pain ever since.  You know the doctor’s office was supposed to file a claim with insurance but they didn’t do it in time to get paid.  You know the car lot sold you a lemon that started for just 3 days before dying. You know basic facts of the case better than the collection attorney. 

You are frustrated because they don’t answer questions. You are frustrated because they say all the money is due now and they won’t accept payments.  So you quit paying.

It’s time to change your mindset and go on the attack.  Demand answers.  Demand documents.  Demand they answer written questions.  Schedule meetings–i.e., depositions–with the creditor who sued you.  Go face-to-face.  They didn’t want to answer your 2 minute phone call?  Schedule a half-day deposition with Dr. Arrogant and see how he likes his afternoon golf game canceled. 

Getting sued is nerve racking. But it is also an opportunity.  It is an equalizing event.  Get busy. Get organized.  Demand answers.  And along the way, you might discover that settlement offers are offered, payment plans become possible, and getting sued was the best thing that ever happened to you.

Image courtesy of Flickr

If you were sued on a debt you have 30 days from the date you are served the paperwork to file a written response with the Clerk of the Court.

Let’s review:

  • You have 30 days to respond.
  • The response must be written
  • The response must be filed with the Clerk of the Court.

How do you respond? What form do you use?

Here is a link to the Answer and General Denial form provided by the Nebraska court system.

The form is very simple. Enter the following information:

  • State whether you were sued in “County” or in “District” court. (In most cases this is County court.)
  • The name of the County.
  • Name of the Plaintiff (the person who filed the lawsuit).
  • Name of the Defendant (your name).
  • Case Number (for example: CI 23-1234)
  • Sign the form at the bottom
  • Enter your address, phone number and email address.

That’s it. You don’t have to write an essay of why you do not owe the debt. You do not have to explain that Amazon mailed you the wrong color sweater or that the doctor amputated the wrong toe.

This court form is a “General Denial.” You hereby dispute the debt. It does not matter why you are denying the debt.

Of course, it may matter to you. And if the doctor amputated the wrong toe you can certainly add that information, but you don’t have to. That big empty space in the middle of the form that seems to invite you to tell your life story and all the wrongs the Plaintiff committed is optional.

Affirmative Defenses.

If you have an affirmative defense, you do need to state that in the response. For example, if the debt collector is suing on an expired debt, you will want to assert a Statute of Limitations defense. If you don’t assert the defense in writing it is lost.

What happens after you respond to a lawsuit?

The plaintiff’s attorney will typically request additional information from you (called Discovery) or they will schedule the matter for a Summary Judgment hearing.

Filing the written answer has prevented a Default Judgment from being entered, but it does not resolve the lawsuit. There is work to be done. Start contacting the plaintiff’s attorney. Request a payment plan if that is your goal. Offer a settlement of the debt. Get a conversation going.

If you are disputing the debt entirely, now you need to prove your case. Start gathering evidence. Demand documents (Motion to Produce Documents). Send written questions to the plaintiff’s attorney (Interrogatories). Schedule a deposition (live questions before court reporter) of the opposing side. Gather the facts to submit to the judge at a hearing.

The second great power of Discovery is the Motion to Produce Documents.

When a bill collector sues for nonpayment of a debt, they also open themselves up to answer questions–finally!!–and to provide documents.

What type of documents? Well, any document relevant to the debt.

Sued on a medical debt?

  • Demand to see the invoices and the claims filed with the health insurance company.
  • Demand the intake forms.
  • Demand copies of all correspondence with the medical insurers.
  • Demand a copy of the Master Service Agreement between the hospital and the insurance company to see if the hospital had a contractual duty to file a claim.

Sued on a on a credit card account?

  • Demand a copy of the written contract.
  • Demand a copy of all billing statements.
  • Demand a copy of all notices of interest rate changes.

Rule 26 of the Nebraska Rules of Civil Procedure requires all parties to a lawsuit to provide requested documents with in 30 days.

Does the bill collector have these documents? Probably not. In fact, about the only thing a bill collector has is a list of names and amounts owed by each customer. A bill collector typically has nothing other than your name, address and the amount you owe. They have no actual proof of the debt.

What does a bill collector do when you demand documents?

  • They ask their client to provide them.
  • They slow down and start looking–actually looking–at the lawsuit.
  • They think about all the time it will take to provide the documents.
  • They start thinking about accepting a settlement of the debt.

What if the bill collector cannot provide the documents? Sometimes a creditor does not provide documents because they are not available. They can’t get them. All they have is a list of the debts, but no actual proof of the debt. No contracts or statements or payment histories. In short, they have no proof of the debt.

Sometimes they just ignore the request for documents. Then what? A few options exist.

  • File a Motion to Compel Discovery to demand the documents and schedule a hearing with the court.
  • File a Motion for Summary Judgment. If they cannot produce the documents then there is no proof of the debt. Had the debt truly existed they would have documents to prove it, but since they don’t have the documents the court may dismiss the entire case.

Requesting documents is a powerful tool bill collectors do not want you to exercise. Collection litigation firms are not designed to prove the existence of debts. Rather, they process debt cases with no proof at all. It’s all about process and not proof. That process is premised on consumers not fighting back.

Demand those documents. Fight back!

Image courtesy of Flickr

You were sued on a collection lawsuit and managed to file a written response with the Clerk of the Court within 30 days. Congratulations, you have stopped the entry of a default judgement.

But now what? What is your plan of action after filing a response to the lawsuit?

The next phase is to get answers, especially if you do not agree with the creditor’s claim.

  • They say you owe a large medical debt, but didn’t health insurance pay a large portion of the bill?
  • Did the hospital forget to file a medical insurance claim?
  • Did the credit card lender give you credit for all the payments you made?
  • What is the interest rate on the contract?
  • Was the contract written or verbal?

Collection agencies don’t like to answer questions. They are focused on filing lawsuits, obtaining judgments by default, and garnishing paychecks.

They don’t answer questions about why you owe the money, unless you make them provide anwers.

INTERROGATORIES:

Any party may serve upon any other party written interrogatories to be answered by the party served. Nebraska Trial Rule §6-333

Interrogatories are written questions you can make the other side answer. There is no special format you must use, but there are some guidelines to follow to make the process work:

  • Mail the written questions to the attorney representing the collection agency.
  • In the memo of the letter, write the work Interrogatories and reference court Rule 33.
  • Advise the other side that they have 30 days to respond to the Interrogatories.
  • Ask specific questions.
  • Ask one question at a time.
  • Number each question.
  • Ask for a list of all persons having knowledge of the lawsuit, their address and phone numbers.
  • Ask for a list of the persons they will call as witnesses at trial.
  • Ask for a list of all documents they will introduce at trial.
  • Request a list of all charges on the account.
  • Request a list of all payments made on the account.

Lawsuits are your opportunity to finally get answers. Make them answer questions.

Image courtesy of Flickr and womencandoit

If you bothered to file a written response to a lawsuit with the Clerk of the Court, what is the next step?

What happens after you respond to a lawsuit?

Discovery:

The next step in litigation is called “discovery.” It is your opportunity (and the creditor’s opportunity) to get answers to questions. Unfortunately, this tends to be the most powerful tool in the debt defense arsenal that most people are clueless about using.

Discovery is powerful. It includes these legal tools:

  • Interrogatories. These are written questions you can make the creditor answer.
  • Motion to Produce Documents. You can demand a creditor provide all documents relevant to your case.
  • Requests for Admission. You can demand a creditor admit or deny specific facts. (Example, please admit or deny you received check #313 in the amount of $414 on or about April 1, 2018).
  • Depositions. A deposition is testimony you can obtain from anyone with knowledge of the case that is usually recorded on video or written down by a court reporter.

All of the court rules available to someone sued on debt can be found in Article 3 of our Nebraska court rules.

In the next blog posts we will explore each of these powerful tools you have at your disposal to get the facts straight.

High volume collection attorneys base their entire practice on the fact that few defendants fight back. If defendants fought back and demanded proof of their debt, the entire collection field would collapse.

Over 95% of judgments are obtained by default when defendants fail to respond to the lawsuit. Of those that do bother to file a response, few are equipped to take the next step.

It’s time to take the next step. Demand answers. Demand documents. Ask questions. Interview the other side.

When you make the other side work, that’s when cases get dismissed or settled. Roll up your sleeves and get to work.

I read this comment from another bankruptcy attorney today:

“Help me understand why the home value (Z)estimates from a company that lost nearly $1 billion of its own money by relying on those (Z)estimates to play in the house flipping market are reliable.”

Home values provided by Zillow are important in bankruptcy cases, even if those values tend to be inflated.

The first thing I do when speaking to a prospective client who owns a home is to type their address into a Google search. Up pops a list of home valuations, and Zillow is almost at the top of the list.

Why do we search the Zillow value? Because only $60,000 of a home’s equity is protected in a Nebraska bankruptcy case, and it is extremely important to get an accurate valuation of a client’s home.

County assessor values tend to be low. Clients tend to underestimate their home’s value. So it is very important that a bankruptcy attorney look at outside sources.

We look at the county assessor’s webpages, Zillow, Realtor.com, and other valuation sites to get an idea of a home’s value.

What you should know is that the bankruptcy trustee also looks at these valuations as well.

If a Chapter 7 Trustee sees a Zillow value that is substantially higher than the value listed on the bankruptcy schedules, problems will arise. The Trustee may have a real estate agent inspect the home to see if it is worthwhile to sell the home.

Chapter 7 Trustees are paid a commission to uncover undervalued real estate and to sell homes if more than $60,000 of equity exists. That’s why we cannot ignore those Zillow valuations (“Zestimates”).

Problems with Zillow Values:

  • Damage to homes. Zillow does not know if your home has a cracked foundation or a leaky roof.
  • Deferred Maintenance: Zillow does not see if you have kept the home up to date with regular maintenance.
  • Dissimilar Neighborhoods. Perhaps your home is next to a fancy neighborhood, so the sales price of those homes tends to artificially inflate the Zillow value.

Are Zillow values accurate? Sometimes yes and sometimes no. But they are always relevant and must be addressed.

Explain Why Zillow is Wrong:

If a Zillow value overstates a home’s value, the bankruptcy schedules must address that issue. The home description should list the Zillow value and then explain why it should be ignored. (“Zillow value is inaccurate due to crack in foundation and leaky roof.”)

Online valuations are part of the new bankruptcy landscape. It’s a factor we cannot ignore.

Image courtesy Flickr and ajay_suresh