The amount of property you can keep depends on its value and the type of bankruptcy filed.
“Can I keep my stuff?” is a very common question that bankruptcy attorneys hear from potential clients who may be excited about the prospect of debt relief but less excited about the thought of liquidating their assets in the process. Many people are especially concerned about keeping their jewelry, which besides being lovely and valuable also often has intense personal and sentimental meaning. The good news is that bankruptcy law provides for individuals to keep their most important possessions during bankruptcy. This can include jewelry.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy actually allows you to keep all of your property, including everyday jewelry like wedding bands right on up to luxury pieces. This is because Chapter 13 bankruptcy is actually designed for individuals who have assets and income, but have gotten so far behind in their debts that they need help to catch up. Chapter 13 restructures debts into a single court-administered repayment plan, and at the end of the 3 to 5 year plan the remaining portion of any unsecured debts can often be discharged.
Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy, a court-appointed bankruptcy trustee will be in charge of helping to sell property and liquidate assets so that funds can be directed to your creditors. However, because the point of bankruptcy is to recover from debt and move forward, you are permitted to keep assets like a home, a car, furniture, clothes, etc. that you need to live a normal, productive life. There are two sets of exemptions that you can choose from when deciding how you want to treat your property in a Chapter 7 bankruptcy.
Under Exemption System 1, you are allowed to keep up jewelry, art, and/or heirlooms worth up to $7,175.
Under Exemption System 2, the jewelry exemption is only $1,425. However, you can cobble together more protection from other exemption categories. For example, your wedding ring, watch, or a gold cross necklace could be kept as part of your “wearing apparel” as long as the jewelry is something you really do wear regularly and it is not extraordinarily valuable. You may also use your $1,280 wildcard exemption or any unused portion of your $24,060 homestead exemption to cover your jewelry under Exemption System 2.
If you still have too much jewelry for the exemptions you’ve chosen, you may give up other exempt assets to your bankruptcy trustee instead. Often the trustee will agree to such an arrangement as long as the assets you give up cover the value of the extra jewelry you want to keep.
