Is the Bankruptcy Trustee Going to Sell My Jewelry?

            Many folks delay seeking bankruptcy advice from an attorney because they heard from a friend, neighbor, or any other random person who is not an attorney that if they file bankruptcy the trustee is going to sell all of their jewelry.  Of course, not wanting to have to give up their engagement ring, grandmother's pearls, etc., they avoid even talking to a qualified attorney about whether or not bankruptcy could help them out of a bad financial situation.

           First, I need to get on my soap box for a second in taking legal advice from people who are not attorneys licensed to practice law in the state in which you live and whom practice in the area of law in which you need advice.  Translation=your cousin in California who practices family law really doesn't know a lot about bankruptcy law in Indiana.  Your friend who filed bankruptcy 6 years in Indiana probably doesn't know a lot about bankruptcy law in Indiana.  Even the financial expert on television who seemingly knows every law ever written (Suze Orman) probably does not know a lot about bankruptcy law.  One would think it would be obvious not to take legal advice from someone who is not a lawyer....but in my experience folks will take legal advice from about any source.  Let me break it down.  Attorneys receive an undergraduate degree from college.  During college they take an entrance exam similar to the ACT/SATs for law school called the LSATs.  They then apply to law schools, which requires lots of time, writing an essay, etc.  Once they get in to law school they spend 3 years studying how to read, interpret, argue and write like a lawyer.  During the summers of law school they often work for lawyers and judges learning how to actually be a lawyer (which you really don't learn in law school).  During law school their grades are typically dependent on one test at the end of a semester that counts for their entire grade for that semester.  It is not uncommon for 20% or more of people who start law school to flunk out or quit because it is not the most fun thing anyone will do in their life.  Before graduating from law school a person must take a test about ethics in practicing law.  They then must apply to sit for the bar exam (which in Indiana is a test that takes 2 full days).  Before they can even take the bar exam they have to fill out an extensive application and have an interview with a practicing attorney regarding their character and fitness to practice law.  They must also have several letters from attorneys recommending that they be able to take the bar exam.  A law school graduate will typically spend about 3 full months studying for the bar exam full time.  Then, about 2 months after the law school graduate takes the bar exam he or she will find out whether or not they passed.  Once they pass they have to pay some fees and take an oath before they can actually practice law because it is only at that point that they are licensed to practice law.  Yes, the practice of law requires a license.

         Ok....I know that the previous paragraph was really, really long and went into to more detail than you ever wanted to know about becoming a lawyer.  I apologize.  I needed to get that off of my chest.  I just want people to realize that attorneys are not just "googling" answers to their problems and that most legal issues are far more complex than a non-attorney realizes.  As the saying goes, "you don't know what you don't know."  And, as I said above, lawyers don't know everything about every law.  Myself, for example...I know very little about criminal law.  I would never take a criminal case unless I spent several months studying criminal law in Indiana.  There are simply to many areas of practice of law for every attorney to know everything....let alone for someone who has never studied law to know everything.

       But back to the actual topic of this blog.....the trustee is not typically going to sell your jewelry in an Indiana bankruptcy.  This does not mean that it is impossible, but it is unlikely.  This is true because an individual is entitled to have $9,350.00 as of the date of this blog in personal property that is exempt from creditors.  This means that between your jewelry, clothing, furnishings, home goods, equity in your vehicle, and any other "stuff" you have around your house that $9,350.00 is safe.  If you file a joint bankruptcy petition that number is doubled to $18,700.00.

       So, lets say that you have a really nice diamond engagement ring.  Your husband paid $10,000.00 for it when you were engaged 10 years ago.  Most of my clients would tell me that the ring is now worth at least $15,000.00 due to the rise in gold prices....and maybe they are right.  I don't know how much the ring is worth because I am not a jeweler.  So, it is often useful to take the piece of jewelry to a jeweler to have it valued.  Typically, the jewelry is worth far less than my clients think.  One big reason for this is because the jewelry is used.  Think about it.....who really wants a used diamond engagement ring?  Why did the person who owned it prior to you give it up?  Divorce?  Death?  Another reason that it is not worth as much as most people think is that those purchasing used jewelry are not going to pay retail value.  They are going to want to get a great deal.  So, even if you paid $10,000.00 for the engagement ring it might be worth $6,000.00 today.

        But, for sake of illustration, lets assume that you take your ring to a jeweler and it is actually worth $10,000.00 in its used condition.  Does that automatically mean that the trustee will sell it?  Not necessarily.  The trustee is going to take into account that if they were able to sell your ring for $10,000.00 that they would have to give you a portion of the proceeds.  If you valued all of your other property at $1500.00 then the trustee would have to give you $7,850.00 from the proceeds of the sale of the ring.  This would leave the trustee with $2,150.00 from which they would need to deduct expenses in actually selling your ring.  So, the trustee may be willing to sell your ring in these circumstances.  However, the trustee would also give you the opportunity to pay the trustee some amount (probably less than $2,150.00) over a small amount of time in lieu of the trustee taking and selling the ring.

         If you are a joint bankruptcy debtor even after you have used $10,000.00 of your $18,700.00 exemption for the ring, so long as you do not have more than $8,700.00 of other property the trustee will not have any claim to your ring.  Again, even if you do have excess property the trustee will only sell something if they believe it will result in a meaningful distribution to creditors.  

        If you are filing a Chapter 13 bankruptcy you will not lose the ring.  This is because in order to have a Chapter 13 repayment plan you must pay more to your creditors over 36 to 60 months than they would have received if you filed a Chapter 7 and your unexempt assets were liquidated.  

       Hopefully I have debunked the myth that if you file bankruptcy you will automatically have your jewelry seized and sold out from under you.  But, as you can see from my rant on what it takes to become an attorney and my blog......bankruptcy is complicated.  One move can have an effect on so many other areas of bankruptcy and people not licensed to practice law (and some attorneys not practicing in the area of bankruptcy) are simply not qualified to give advice.  Luckily, there are many bankruptcy attorneys in central Indiana and the Indianapolis area who are more than qualified.  I am only one of many attorneys who practice bankruptcy in this area and I am happy to report that in my opinion, most are very good at what they do.  So, although you are entitled to file a bankruptcy on your own, I recommend that you meet with an attorney in your area who practices bankruptcy law.  If you live in Noblesville, Carmel, Kokomo, Zionsville, Tipton, Anderson, Fishers or Indianapolis and you would like to meet with me about potentially filing bankruptcy I am happy to do so without any fee for the initial consultation.  If you would like to set up an appointment to meet at Halcomb Singler's office in Carmel, Indiana, please call me at (317) 575-8222 or click here and we will contact you.

Halcomb Singler, LLP, is a debt relief agency.  It helps people file for bankruptcy under the bankruptcy code.  No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so.  The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.