Personal Collections and Bankruptcy

Personal collections of collectibles can be protected under the bankruptcy code. However, the value of those items will be important in determining how protected they will be. In most cases, you will be able to keep your stuff.

All assets must be listed when filing a bankruptcy. This includes obvious things such as homes, cars, investment accounts, cash, and electronics and furniture. These items are then exempted from your creditors, using either the federal or state exemption (in most cases filed in Pennsylvania the federal exemptions will be used).

There are specific exemptions for things such as jewelry, real estate, cars, and tools of the trade. But what about personal collectibles? This may include things such as art, antiques, comic books, baseball cards, sneakers, coins, or any other number of collectible items. In most cases, the wild card exemption of the federal exemptions will be used to protect these items from your creditors. For something like sneakers, the exemption for household goods may be allowed, as this includes wearing apparel and shoes.

What values will be listed when trying to exempt these items? The value will be what the items would sell for if they were sold through normal markets, such as eBay or other consignment options. Not what you paid for them originally. In most cases, the United States trustees office is not interested in selling these items unless a significant and easy profit can be made to be used to pay your creditors. The United States trustees office will not want to set up a stand at a comic book convention to sell your old comics. If you have a massive collection of anything that could easily be sold in bulk, they may become interested. But once again, we only need to use the exemption amount for what they would get if the items were sold, given all of the circumstances that make it difficult to sell such items.

In the vast majority of cases, the United States trustees office will not be interested. However, this does not mean that you do not have to list these items or disclose them. As your bankruptcy attorney, I will help you determine whether or not losing personal collections or collectibles would be a realistic possibility. We will try to fit them under the various exemption schemes. If you have questions about bankruptcy or protecting your assets, call us at 412-414-9366 set up a free consultation to discuss your situation. It would be happy to answer your questions and explain the process.

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.

Can I Keep My Car In Bankruptcy?

Yes!

Now, that short, emphatic answer will need to be qualified in a bit, as you must be able to afford your car and continue making payments. But, as long as you can make the payments, you can keep a car in Chapter 7 and Chapter 13 bankruptcy.

The Bankruptcy Code is premised on the idea of giving debtors a "fresh start". This means giving bankruptcy filers the opportunity to go on with their lives and work as normal, and get back on their feet. Having a car is vital for many filers, so the Code protects their ability to keep their car. You need your car to go to work, pick up your kids from school, and run day-to-day errands. The law recognizes this, and makes it fairly easy to protect your vehicle.

The Federal bankruptcy exemptions allows debtors to protect $3,675 in equity for one car (two cars if the bankruptcy is a joint, marital filing). This $3,675 need only be applied to the amount of equity you possess, that is, the value of the car minus what is owed on it. Since cars depreciate so quickly, equity is normally quite small in a car. This is good news for bankruptcy purposes, as it allows most debtors to exempt their car.

A problem may arise if the debtor has multiple vehicles in their name. However, even this should not be an issue if the "wildcard" exemption is available to protect the second vehicle. The wildcard exemption can also be used if the automobile exemption is exhausted. An experienced bankruptcy attorney will be able to help you properly exemption plan.

The second issue in keeping your car is whether you can afford to continue making payments. When filing a Chapter 7 bankruptcy, you must be completely current on your payment at the time of filing if you wish to keep your car. Otherwise, the finance company can (and will) repossess the vehicle. If you are behind and want to file a Chapter 7 bankruptcy, it will normally be advisable to wait to file until after your payment is caught up. If you are behind on the payment and wish to abandon the car, Chapter 7 bankruptcy allows you to do so, while your obligation on the remaining payment will be dismissed. It is something to consider if your car payment is prohibitively high, or your car is a "lemon".

Chapter 13 bankruptcy allows you to not only keep your car if you are current on your payment, but also to catch up on arrears over the course of the bankruptcy plan. This is extremely important if your car payments are past-due and you are facing repossession. The Chapter 13 plan allows you to catch up over the course of the 3 to 5 year plan, and at its conclusion you will receive the title of the car. The Chapter 13 plan allows the arrears to be spread out over the full term of the plan, so even if you are multiple months behind, it is possible to catch up.

Misinformed debtors often believe they will lose their car in bankruptcy, but as long as it can be exempted (and it normally will be) and your payment is current, you can keep your car in bankruptcy. 

If you have fallen behind on payments and want to consider filing a Chapter 13 bankruptcy, contact us to set up a free consultation.