Whether you can keep jewelry, watches, and wedding rings in Illinois depends on what type of bankruptcy you file (Chapter 7 or Chapter 13), how much the jewelry is worth, and whether you need to protect other assets as well.
Keeping Jewelry in Chapter 13 Bankruptcy in Illinois
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 Illinois
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.
Illinois Bankruptcy Exemptions
Not all of your property is up for grabs, however. Illinois (and each of the other states) 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.)
Some states allow you to choose between the state exemption system and another set, called the federal bankruptcy exemptions. But Illinois is not one of these states. If you file for bankruptcy in Illinois, you must use the Illinois bankruptcy exemptions.
Using the Wildcard Exemption to Keep Jewelry in an Illinois Bankruptcy
Unlike some states, Illinois does not have a specific exemption for jewelry. But it does have a wildcard exemption which allows you to protect up to $4,000 worth of any type of personal property, such as clothing, jewelry, wedding rings, furniture, and the like. (Learn more in The Illinois Wildcard Exemption in Bankruptcy.)
If you are married and filing a joint bankruptcy, you can protect up to $8,000 of your personal property.
Keep in mind that these amounts apply to all of your personal property in the aggregate. So if you want to protect $1,000 worth of furniture, $1,000 in clothing, and $1,000 in artwork, you’ll have $1,000 left for your jewelry. Illinois has a separate exemption for motor vehicles (up to $2,400) and health aids (unlimited amount), so you may not have to dip into the wildcard exemption to protect these, which leaves more for your jewelry.
Keeping a Watch in an Illinois Bankruptcy
Illinois has a separate exemption which protects your clothing up to an unlimited value in bankruptcy. Some courts across the country have ruled that a watch of moderate cost counts as "wearing apparel." By arguing that your watch is clothing, you might be able to keep it and not have it count against your wildcard exemption. This is especially true if the watch is not expensive and you have no other portable means of telling time.
How to Value Jewelry in Bankruptcy
The value of your jewelry for exemption purposes is the amount you would have to pay, on the date you file for bankruptcy, 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 Illinois 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.