Usually, when I meet with a prospective bankruptcy client, the first question I get is “how long will it take me to recover after filing bankruptcy” and the second question I get is “will I have to give up my personal items like furniture and jewelry?”
The “recover from bankruptcy” question is the subject of a different blog post, but I can tell you that in my experience of over 23 years, I rarely, if ever, see anybody lose any of their personal property when they file bankruptcy.
Let’s take jewelry, for example. In Georgia, you can protect or “exempt” up to $500 worth of jewelry. This means that you may have $100,000 of credit card debt and you can wipe all of that debt out and still keep your $500 worth of jewelry because under the Georgia exemption statute, this jewelry is exempt.
But wait – there’s more. If you file jointly with your spouse, each of you gets to claim the $500 exemption, making a total of $1,000. Further, the exemption law allows you an extra $600 of “wildcard” exemption that can be applied to jewelry, and you can take up to $5,000 of your real estate exemption and apply it to jewelry as well.
Thus, an individual can exempt $500 + $600 + $5,000 = $6,100 worth of jewelry. A couple filing jointly can protect up to $12,200 worth of jewelry.
What if your jewelry is worth more than $6,100 (individual) or $12,200 (married couple)? I would advise you to get that jewelry valued. As Charleston bankruptcy lawyer Russ DeMott points out on his blog, people buying used jewelry want a deal–a really good deal. That heirloom ring you think is worth $15,000 may fetch only $2,500 from a wholesale jewelry buyer.
I usually refer my clients to visit a jewelry buyer (essentially a high end pawn shop). While the written estimate you will get won’t make you feel very good about your watches and rings, that low written appraisal will help convince your bankruptcy trustee that your jewelry is not worth the effort to liquidate. If the trustee does decide that your jewelry has value, you have the right to take the valuation question to the bankruptcy judge for a ruling, or you can offer to “buy the trustee out” of the estate’s interest – usually by making payments over 6 months to a year of the non-exempt equity.
Further, as Russ points out, if the trustee does want to sell your jewelry, he has to pay you the value of your exemption – which amounts to a lot of work for the trustee unless your jewelry is extraordinarily valuable.
Finally, if you did reach an impasse with your Chapter 7 trustee about your jewelry valuation you can always convert to Chapter 7 and pay back some or all owed to your unsecured creditors and keep your jewelry as of right.
The bottom line – while your jewelry is theoretically at risk, as a practical matter, you are unlikely to lose even a single bauble in bankruptcy.