Whether you can keep wedding rings, watches, and other jewelry in a Arkansas bankruptcy depends on what type of bankruptcy you file (Chapter 7 or Chapter 13), whether you use the Arkansas or federal bankruptcy exemptions, how much the jewelry is worth, and whether you need to protect other assets as well.
If you use the Arkansas exemptions, you can keep up to $200 ($500 if you are married) of your jewelry, plus any items that might be considered “wearing apparel.” If you use the federal bankruptcy exemptions, you can keep more of your jewelry. Get the details below.
Keeping Jewelry in Chapter 13 Bankruptcy in Arkansas
In Chapter 13 bankruptcy, often called a reorganization bankruptcy, you enter into a repayment plan for three to five years. Your creditors get paid through the plan – some in full and some in part. Although a Chapter 13 plan requires a long commitment, the advantage is that you get to keep your property, including jewelry.
If you have very expensive jewelry however, that will probably affect how much you will be required to repay unsecured creditors.
Keeping Jewelry in Chapter 7 Bankruptcy in Arkansas
Chapter 7 bankruptcy works differently. In Chapter 7, you must give up certain items of property. The bankruptcy trustee sells this property and uses the proceeds to repay (at least in part) your unsecured creditors.
Arkansas Bankruptcy Exemptions
Not all of your property is up for grabs, however. Arkansas has enacted laws that protect certain types of property. These laws are called exemptions. Some property is exempt no matter what the value, and other property is exempt only up to a dollar amount. The idea behind exemptions is that someone filing for bankruptcy should not be stripped of basic things needed for living – like shelter, clothing, furniture, a car, and the like. (Learn more about how bankruptcy exemptions work.)
In Arkansas, you can choose to use either the Arkansas bankruptcy exemptions or another set of exemptions called the federal bankruptcy exemptions (17 states and the District of Columbia also allow you to use the federal exemptions). Whichever set you choose, you must stick with it -- you cannot mix and match from each set. For this reason, it’s important to review all of the exemptions in each system before making your choice.
Here’s an example as to why looking at the whole scheme is important: The federal bankruptcy exemptions allow you to keep more of your jewelry than do the Arkansas exemptions. However the Arkansas homestead exemption is more generous than the federal homestead exemption. You wouldn’t want to pick the federal system in order to keep an expensive necklace, only to lose your house. (Review the Arkansas bankruptcy exemptions and the federal bankruptcy exemptions.)
Keeping Jewelry If You Use the Federal Bankruptcy Exemptions
If you have jewelry of value, you’ll be able to keep more of it if you use the federal bankruptcy exemptions.
There are several provisions of the federal bankruptcy exemption system that you can use to keep your jewelry. If you are married and filing a joint bankruptcy you can double these amounts.
- Jewelry exemption. You can keep up to $1,550 of your jewelry.
- Wildcard exemption. You can keep up to $1,225 of any type of property, including your jewelry. If you don’t want to use the wildcard to protect other property, you can put the full $1,225 towards your jewelry.
- Unused homestead exemption. If you don’t use the homestead exemption, or only use part of it, you can use up to $11,500 of the remaining amount for anything you want, including your jewelry. The federal homestead exemption is $22,975.
Keeping Jewelry If You Use the Arkansas Bankruptcy Exemptions
The Arkansas bankruptcy exemptions are somewhat stingy when it comes to personal property. Below are the exemptions available to protect jewelry.
- Personal property exemption. If you use the Arkansas bankruptcy exemptions, you can keep up to $200 of your personal property ($500 if you are married). If you are married and filing a joint bankruptcy each spouse can exempt $500 of personal property. These caps apply to all of your personal property combined. So if you are single and use $200 to protect a musical instrument, you won’t have anything left for jewelry. Ark. Const. art. IX, § 1 , §2.
- Clothing exemption. If you use the Arkansas exemptions, you can keep your clothing to an unlimited value. Some bankruptcy courts in other states have allowed bankruptcy filers to keep a modestly-priced watch under the wearing apparel exemption. Check with a local bankruptcy attorney to find out if your local court allows debtors to exempt watches or other small jewelry items under the clothing exemption. Ark. Const. art. IX, § 1 , §2.
If you take a look at the Arkansas bankruptcy exemptions, you’ll notice line items for wedding rings (to an unlimited value) and other personal property, like motor vehicles. Ark. Code Ann. § 16-66-218. However, the Arkansas Constitution contains a provision that limits personal property exemptions to your clothing (to an unlimited value) plus $200 (single person) or $500 (married person) for your other personal property. In 1990 the Eight Circuit Court of Appeals ruled that the bankruptcy exemptions relating to personal property were unconstitutional because they conflicted with the Arkansas Constitution’s cap on personal property exemptions. In re Holt, 894 F.2d 1005 (8th Cir. 1990); see also In re Kelley, 455 B.R. 710 (Bankr. E.D. Ark. 2011).
How to Value Jewelry in Bankruptcy
The value of your jewelry for exemption purposes is the amount you would have to pay to replace each item with a used item of similar age and in similar condition. There are various methods of determining the replacement value, but for expensive jewelry you will almost always need an appraisal. (Learn more about how to value personal property in bankruptcy.)
Other Ways to Keep Jewelry in an Arkansas Bankruptcy
If you want to keep nonexempt items of jewelry, the trustee may accept other items of exempt property in exchange for the jewelry. The trustee would then sell these items instead of your jewelry to repay your creditors.
Similarly, if you have some cash, you may be able to reimburse the bankruptcy trustee for the value of the jewelry you want to keep. Again, the trustee would use this money (instead of selling the jewelry) to repay unsecured creditors.