Formula for calculating present value of a promissory note owed
Posted: Tue Sep 03, 2013 4:41 pm
Ah, that's what I was trying to get at but couldn't quite articulate!
I want the number to be as low as realistically possible.
On Tuesday, September 3, 2013, Michael Avanesian wrote:
> **
>
>
> At 10% it's $78,441.97.
>
> That's not how I would lawyer it though. I would look at the facts to see
> what someone else on the market would pay for it given the likelihood of
> collection.
>
> If the person who owes your client money has very few assets and a shaky
> work history, how much can you expect an investor to buy it for?
>
> You have a note worth 100k in 5 years.
>
> The investor probably wants a 20% return and he'll offset that risk by
> another 10% if you're lucky (so 30% total return/year).
>
> At 30%, the note is worth $51,514.22. I don't think investors would be
> interested in buying this note even at 30% unless the obligor has a stellar
> credit score and good work history. It's going to take this investor 2.5
> years just to break even.
>
> There is another issue here that a legit investor would have to worry
> about. That is, he's paid 51k for a note worth 78k. Assuming the purchaser
> is not a relative of the borrower and no modification is made, the 27k
> profit is going to be taxed as regular income over 5 years at about 44%
> (whether actually paid or not!). So you have a lot of room to play with
> this number.
>
>
> Sincerely,
> Michael Avanesian
> Law Offices of David A. Tilem
> www.tilemlaw.com
> 818-507-6000
>
>
> On Tue, Sep 3, 2013 at 2:04 PM, Giovanni Orantes wrote:
>
> **
>
>
> Well, that is always the contingency. Using a 4.25% discount rate, the
> present value of such a stream of income is $89,946.03.
>
>
> On Tue, Sep 3, 2013 at 1:27 PM, Holly Roark wrote:
>
> **
>
>
> $1,666.66/ month for 60 months. It's uncertain because it's dependent upon
> the debtor's debtor being able to make the payments and if debtor's debtor
> files BK there is no collateral for the debt so it could be wiped out.
>
>
> On Tuesday, September 3, 2013, Giovanni Orantes wrote:
>
> **
>
>
> Here you go:
>
>
>
>
>
> If you don't wanna work with that: How is it going to be paid? Monthly?
> How much each month? How is it uncertain?
>
>
> On Tue, Sep 3, 2013 at 12:56 PM, Holly Roark wrote:
>
> **
>
>
> Debtor has a promissory note with a face value of $100,000. The interest
> is already incorporated into it. The $100,000 is to be paid over five years
> to debtor. Of course it is uncertain whether the person will pay debtor on
> the note. If debtor files chapter 13, I need to be able to value this
> asset. Since it is uncertain and is to be paid over five years, is there a
> formula to calculate the present value of this asset so I can exempt some
> or all of it under the wild card?
>
> Please direct me to the appropriate formula. Thank you.
>
>
>
>
> --
> Holly Roark
> Certified Bankruptcy Specialist*
> holly@roarklawoffices.com **primary email address**
> www.roarklawoffices.com
> Central District of California
> Consumer Bankruptcy Attorney
> 1875 Century Park East, Suite 600
> Los Angeles, CA 90067
> T (310) 553-2600
> F (310) 553-2601
>
> *By State Bar of California Board of Legal Specialization
>
>
> **For a quicker response, email me at holly@roarklawoffices.com.
> I only use gmail for my listservs, and am likely to miss private emails
> directed to my gmail account.**
>
>
>
>
>
> --
> Giovanni Orantes, Esq.
> Certified Bankruptcy Specialist*
> Orantes Law Firm, P.C.
> 3435 Wilshire Blvd. Suite 2920
> Los Angeles, CA 90010
> Tel: (213) 389-4362
> Fax: (877) 789-5776
> e-mail: go@gobklaw.com
> website: www.gobklaw.com
>
> *Board Certified - Business Bankruptcy Law - American Board of
> Certification
> *Board Certified - Consumer Bankruptcy Law - American Board of
> Certification
>
> WE ARE A "D
>
>
>
Holly Roark
Certified Bankruptcy Specialist*
holly@roarklawoffices.com **primary email address**
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney
1875 Century Park East, Suite 600
Los Angeles, CA 90067
T (310) 553-2600
F (310) 553-2601
*By State Bar of California Board of Legal Specialization
**For a quicker response, email me at holly@roarklawoffices.com.
I only use gmail for my listservs, and am likely to miss private emails
directed to my gmail account.**
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