May 20, 2016
Whether you can keep your jewelry in bankruptcy depends on whether you are filing a Chapter 13 or Chapter 7 case, and the exemptions that are available to you. In Chapter 13, you keep your property, including jewelry. In Chapter 7, you will probably be able to keep some inexpensive jewelry and perhaps a wedding ring, but in most states won’t be able to keep expensive jewelry.
In Chapter 13 cases, debtors file a three to five year plan of reorganization, and use their regular income to repay their creditors. Since debtors use their income, and not their property, to fund their repayment plan, debtors may keep all of their property, including, their jewelry, regardless of its value, in a Chapter 13 case.
(To learn more about how Chapter 13 works, see our Chapter 13 Bankruptcy area.)
In Chapter 7 bankruptcy, the bankruptcy trustee liquidates or sells your nonexempt assets and uses the proceeds to repay creditors. Property that a trustee is able to take is known as nonexempt property, and property that a debtor is able to keep is known as exempt property. To determine whether your jewelry is nonexempt or exempt property, you must look to the exemptions that are available to you.
(To learn more about how Chapter 7 works, see our Chapter 7 Bankruptcy area.)
To find out if your jewelry is safe from the trustee you must determine if it is exempt under the laws available to you. All states have a list of exemptions available to bankruptcy debtors. Some states allow debtors to use the federal bankruptcy exemptions instead of the state exemptions. Most states require that you use the state exemptions.
To find out which exemptions are available to you, see the articles in our Bankruptcy Exemptions area.
Some states provide an exemption up to a certain dollar amount for jewelry. For example, in New York you can exempt up to $1,100 total for a wedding ring, watch, and jewelry. Some states provide an exemption up to an unlimited amount for a wedding ring. And some have exemptions for family heirlooms, so if your jewelry came from your great-grandmother, for example, you may be able to protect it under this type of exemption.
Almost all states have a wildcard exemption, which lets you apply a certain dollar amount to your choice of property. If you have a wildcard in your state, you may opt to use some or all of it to protect jewelry.
(To learn more about wildcards, see How to Use the Wildcard Exemption in Bankruptcy.)
The federal exemption scheme allows you to exempt up to $1,600 worth of jewelry. The federal bankruptcy exemptions also allow you to exempt up to $1,250 of any personal property, and up to $12,625 of any unused homestead exemption (these function like wildcard exemptions). You may apply these amounts to jewelry is you wish.
Whether you use your state or federal exemptions, the trustee is entitled to ask for proof, such as an appraisal, of the value of the jewelry you listed on your bankruptcy schedules.
If you owe money on your jewelry, and the jewelry secures that loan, you must continue to pay that loan or the creditor has a right to reclaim the jewelry, regardless of whether it is exempt or not.