Bankruptcy Valuation

Bankruptcy cases generally involve the restructuring or settlement of a debtor’s liabilities. The bankruptcy petition acts as a stay against the ability of the creditor from enforcing their liens. This is referred to as an Automatic Stay. The creditor is required to motion for relief from this stay and repossess the collateral. Under Section 362(d)(2) of the Code, the court will grant relief from the stay if: (i) the debtor does not have equity in the property; and (ii) the property is not necessary to an effective reorganization. The courts are left with the decision to determine the impacts of lifting the stay to all parties. If the courts rule in favor of maintaining the automatic stay, creditors are able to request relief by arguing the collateral does not sufficiently protect their interests. Under Section 362(d)(1) of the Code, the lack of adequate protection for a creditor’s property interest is cause for granting relief from the automatic stay. In order to assess this, the current value of the collateral securing a creditor’s lien must be determined by a valuation expert. In addition to determining the current value of the collateral, it is important to determine the extent to which the collateral has recently declined in value or will likely decline in value in the future. In addressing the valuation issues in this regard, a going concern premise of value is typically assumed (as opposed to a liquidation premise), unless the business is not expected to reorganize. Depending on the facts and circumstances of each situation, all traditional valuation methods (i.e., the income, market, and asset approaches) should be considered. Courts and Attorneys rely on experts in the valuation fields on both sides of the arguments. Our experience with these valuation hearings will make the process easier, allowing the property owners, creditors, and attorneys to focus on the arguments at hand. The principal owner of Adamson Real Estate Advisors, Inc, Patrick Adamson, holds two designations (MAI & SRA) conferred by the Appraisal Institute as well as the certification of Litigation Expert. He has been qualified as an expert witness in the North Georgia and Central Georgia Bankruptcy courts.