## Facts

- An individual debtor filed a Chapter 7 case and scheduled household goods, furnishings, and jewelry as personal property.
- The debtor valued the household goods and furnishings at an aggregate $2,135 and claimed exemptions based on those scheduled values.
- A creditor, Wachovia Bank of South Carolina, objected to the claimed exemptions, asserting the property was substantially undervalued and exceeded applicable exemption limits.
- The creditor alleged a “fair market value” of $27,405 for the household goods and furnishings based on its appraisal.
- At an evidentiary hearing, the creditor’s expert (an auctioneer/appraiser) estimated auction-related values and testified he would personally pay $19,700 for the goods anticipating resale profit.
- The debtor’s expert (a retail-furniture purchaser) estimated suggested retail value at $19,850 and opined that a quick liquidation sale would yield about 20% of retail (approximately $3,900).
- The dispute centered on which valuation approach should control for determining whether the exemptions fell within statutory dollar caps.

## Issues

1. What valuation standard applies to household goods, furnishings, and similar personal property when determining whether claimed exemptions exceed statutory limits.
2. Under the proper standard, whether the debtor’s exemptions for household goods, furnishings, and jewelry should be disallowed or limited due to excessive value.

## Decision

- The court adopted a realistic valuation approach for used household goods, reflecting what the items would bring in a reasonable, commercially realistic sale in the debtor’s market.
- The court rejected using new retail replacement pricing and declined to treat either a distressed “quick liquidation” figure or a specially marketed, profit-driven auction scenario as the controlling benchmark.
- Applying the chosen standard, the court overruled the creditor’s objection in substantial part and allowed the debtor’s claimed exemptions for the household goods and jewelry within the applicable statutory caps.

## Legal Principles

- Exempt household goods and similar personal property should be valued as used property in the debtor’s ordinary local market, based on a willing-buyer/willing-seller transaction without compulsion and with reasonable market exposure.
- Retail replacement value generally overstates exemption value for used household items and is not the proper measure for applying exemption caps.
- Pure “fire-sale” or distressed liquidation pricing may understate value and is not necessarily the correct baseline for exemption valuation.
- Expert valuations driven by an appraiser’s resale-profit expectations or unusually intensive auction marketing may not reflect the property’s value “in the hands of the debtor” for exemption purposes.

## Conclusion

The bankruptcy court held that exemption valuation for household goods and jewelry should reflect realistic used-market fair value in the debtor’s community, and it largely rejected the creditor’s inflated figures, allowing the debtor’s exemptions within statutory limits.


In re Sumerell, 194 B.R. 818 (Bankr. E.D. Tenn. 1996)