Bankruptcy is often a necessity for those drowning in debt. However, it can be a scary process. What can you expect? Will you have to give up all your assets? Will you lose your wedding ring in bankruptcy?
Many people worry about their assets that have sentimental value, such as wedding rings. What will happen to it? Will it be liquidated during bankruptcy?
This depends on your situation. In some states, a wedding band and engagement ring are fully exempt, regardless of value. This means that you would be able to keep them, even if they’re worth a million dollars. This is not true in Maryland. In fact, the state has no specific exemptions for jewelry, but this doesn’t mean that you’ll lose your wedding ring.
The federal personal property exemption for jewelry is $1,875. Even if you bought a piece of jewelry for more than that, you will still likely be able to keep it. The reasoning depends on the bankruptcy.
For example, in a Chapter 13 case, you typically can keep everything that you have. You create a repayment plan based on your disposable income. You typically will not lose any assets, including your wedding ring, as long as you adhere to the payment plan. This is true regardless of value and regardless of whether or not it is exempt.
In a Chapter 7 case, jewelry is valued not at sale or replacement value but at liquidation value. This refers to the amount of money that the Chapter 7 trustee can actually sell the item for. For jewelry, this usually means how much a jeweler or pawn shop would pay for it. This is typically much less than the item’s replacement value or the amount you bought it for.
In most cases, this amount is so small that you would be able to claim it under your general exemptions. In Maryland, those who file for bankruptcy are given a personal property wildcard. This refers to an exemption amount of up to $5,000 that allows you to claim additional personal property except for real estate. So, a wedding ring or other piece of jewelry could fit into this category.
In any case, you still need to follow the bankruptcy guidelines. This includes listing everything that you own, regardless of value. Keep in mind that sentimental value does not usually factor into the trustee’s decision. Only the monetary value matters.
It is important that you give your attorney your honest opinion of the value of all your property. There are ways to protect your property, including jewelry.
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Certain assets are exempt, so you can keep them. Your wedding ring in bankruptcy and other jewelry may fall under this category based on state exemptions.
Count on The Law Offices of Adam M. Freiman for assistance with your bankruptcy case. We will help you every step of the way. To schedule a consultation, call (410) 486-3500 or fill out the online form.
