Legal Question in Tax Law in North Carolina

Fair market value is what a willing buyer is willing to pay and what a willing seller is willing to sell for.

With stuff like cars or land, it can be appraised. So can antique items. However, if you just have used furniture and appliances (but not antiques), it may not be worth more than yard sale value. You can see what similar age items are selling for ... but if you are thinking of filing bankruptcy, this is a discussion you should be having with your bankruptcy attorney.

Insolvency is when your debts outweigh your assets. Furniture and appliances would probably fall within the personal property exemptions and I don't see this as being an area of major concern unless you have valuable stuff. Is your spouse going to file? The exemptions would be doubled if so.

NC allows a debtor to exempt up to $5,000 in personal property and also gives a $5000 "wild card" exemption. There are other exemptions for tools of the trade ($2000), medical implements (hearing aids, wheel chairs and so on). So that is $10,000 worth of stuff (not including a car or land which are subject to other exemptions) or $20,000 if your spouse is filing too. Is your stuff more valuable than that?

What kind of bankruptcy are you considering? A chapter 7 or a chapter 13? If a 13, then this is all academic since the debtor retains all of his property in a chapter 13 and repays debts as per a payment plan. If you have stuff which exceeds the exemptions then you will have to file a chapter 13 or else you will have to relinquish assets to the trustee in a chapter 7.

A thought just hit me - you are coding this as a tax issue rather than a bankruptcy matter. So you may be asking about this if you are trying to use the insolvency test for form 982 to have forgiven income excluded.

In that case, what I said about insolvency and fair market value still stands. For form 982, the test is whether all your debts outweigh all your assets. Most people's biggest assets are the house and car. I would use yard sale/Pennysaver type of value for personal items like furniture or appliances unless these are antique items.

However, I am not a tax lawyer and this is not tax advice. You should consult a CPA who is familiar with form 982. Don't go to a tax place (H&R Block, Jackson Hewitt etc.) They are good at helping ordinary folks but they may or may not have someone who knows about form 982.