Whether you can keep jewelry, watches, and wedding rings in Michigan depends on what type of bankruptcy you file (Chapter 7 or Chapter 13), whether you use the Michigan or federal bankruptcy exemptions, how much the jewelry is worth, and whether you need to protect other assets as well.
Keeping Jewelry in Chapter 13 Bankruptcy in Michigan
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 Michigan
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.
Michigan Bankruptcy Exemptions
Not all of your property is up for grabs, however. Michigan (and all 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.)
In Michigan, you can choose to use either the Michigan bankruptcy exemptions or another set of exemptions called the federal bankruptcy exemptions (17 other 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. You wouldn’t want to pick one system in order to keep jewelry, only to lose your house. (Review the Michigan bankruptcy exemptions and the federal bankruptcy exemptions.)
Keeping Jewelry, Watches, and Wedding Rings Under 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, Watches, and Wedding Rings Under the Michigan Bankruptcy Exemptions
In Michigan, you can keep jewelry using the below exemptions. If you are married and filing a joint bankruptcy, you can double these amounts.
- Jewelry exemption. Michigan allows you to keep up to $600 per item of the following: appliances, books, furniture, household goods, and jewelry. The only caveat is that the combined total of these items cannot exceed $3,775. This means that if you want to keep an antique sofa worth $3,700, you’ll only have $75 left for jewelry.
- Wearing apparel. Michigan allows you to exempt wearing apparel. A few courts across the country have included watches in the definition of wearing apparel. If you want to use this exemption to protect a watch, check with a local bankruptcy attorney to see what your local court might do.
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 Michigan 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.