Will Your Personal Jewelry Collection Survive A Bankruptcy?

Chapter 7 filers have probably heard that their personal assets could be up for grabs when they file. It's important, though not to let rumors and myths about losing property stop you from getting the debt relief you need. Read on to find out about the many ways possessions like jewelry are protected when you file for Chapter 7 bankruptcy.

Liquidation Worries

In theory, the bankruptcy court (and the trustee for your case) does have the power to seize things, sell them, and pay certain costs and creditors. However, most filers have little to nothing to worry about because of the protections offered. There are two main things you need to know:

Exemptions Can Help

Exemptions vary by state, so it's important to know about your particular state of residence. Many states specifically exclude heirloom and personal jewelry from being seized. Others allow filers a dollar amount exemption that covers personal belongings. Still others provide filers with a wild card exemption that may be used for any purpose.

Value Is Misleading

The way the bankruptcy court looks at your assets matters a great deal. As you can see by looking at state exemptions, knowing how much your asset is worth is a vital part of the process. However, the way things are valued is not as obvious as you might think. Items can be valued at market, estate, replacement, or liquidation values. The appropriate value for bankruptcy purposes is liquidation value. In most cases, used items are of little use to the bankruptcy courts, and that includes jewelry. To gain use of a seized item, it has to be sold. Most trustees won't waste time trying to sell used or personal items like an engagement ring even if it's not protected by an exemption.

On the other hand, if you have loads of valuable baubles, speak to your bankruptcy lawyer before you file and get some appraisals done on your jewelry. When it comes to estimating values on items like jewelry, vehicles, homes, and more, it's also helpful to note any outstanding loan balances on them. If you still owe money on an asset, it automatically becomes less valuable to the bankruptcy court because they would have to pay the item off before selling it.

Many people who file for bankruptcy never lose any property. If you have expensive jewelry or other valuables, let your bankruptcy lawyer know about them.