Jewelry and Bankruptcy

A common concern for my clients is whether or not they will get to keep their property. Homes, cars, and retirement accounts are the primary concerns. To a lesser degree, but still of importance, is jewelry. Jewelry can have both significant sentimental and actual value. From engagement rings and wedding bands, to family heirlooms, jewelry can have significant importance.

The good news is, the federal bankruptcy exemption laws directly address jewelry. 11 U.S.C Section 522(d)(4) allows debtors to exempt $1,600.00 in value for jewelry. If the filing is joint, each spouse may use the $1,600.00. In addition, you can also use the bankruptcy "wildcard" exemption if the value of the jewelry exceeds $1,600.00. This amount can be anywhere between $1,250.00 and $12,100.00 more in exemptions depending on how much of the "homestead" exemption you use (this is discussed in other posts). Suffice it to say now, in most cases, jewelry is sufficiently protected.

How is the value of your jewelry determined? Fortunately, the value is NOT the purchase price. Instead, it is the much lower resale price of your jewelry. Jewelry quickly depreciates, and jewelry re-sellers and "cash for gold" buyers typically pay around 1/3 of the purchase price. This method of valuation makes it much more likely that the exemptions will be sufficient to protect your jewelry, especially with the "wildcard" exemptions included.

Some types of jewelry, however, may have a high resale value. Some antique  and luxury watches, such as Rolex or Breitling, may actually INCREASE in value over time. It will be important to discuss these circumstances with your lawyer, and possibly even receive an appraisal to determine the current value. This may also be the situation for some heirloom jewelry. Of course, these situations are rare.

It will also be important to discuss any possible inheritances of jewelry or heirlooms. If you are currently inheriting, or will soon inherit a large jewelry collection, or a particularly valuable piece, let your attorney know when listing your personal property. This will potentially be considered property of the bankruptcy, and will need to be exempted. You will also want to avoid any transfers of jewelry before filing, as the Court may view this as an attempt to hide assets from your creditors. Speak with your attorney before doing anything involving a transfer.

If the value of your jewelry is very large, and exceeds the bankruptcy exemptions, it is still possible to keep it through a Chapter 13 bankruptcy. This would allow you to keep the jewelry by paying your unsecured creditors dollar-for-dollar the unexempt value of your jewelry. Once again, this is a very rare situation, but it is always an option to discuss with your attorney.

Contact us if you have any questions about bankruptcy and protecting your assets. We will be happy to look at your situation in a free consultation.