If you file for bankruptcy in New Jersey, whether you can keep wedding rings, watches, necklaces, and other jewelry depends on what type of bankruptcy you file (Chapter 7 or Chapter 13), whether you use the New Jersey or federal bankruptcy exemptions, how much the jewelry is worth, and whether you need to protect other assets as well. The New Jersey exemptions are quite stingy when it comes to jewelry; the federal exemptions are more generous, especially if you don’t use the homestead exemption.
Keeping Jewelry in Chapter 13 Bankruptcy in New Jersey
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 New Jersey
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.
New Jersey Bankruptcy Exemptions
Not all of your property is up for grabs, however. New Jersey 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 New Jersey, you can choose to use either the New Jersey 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 New Jersey bankruptcy exemptions and the federal bankruptcy exemptions.)
Keeping Jewelry Under the Federal Bankruptcy Exemptions
If you choose to use the federal bankruptcy exemptions, you’ll likely be able to keep more of your jewelry than if you use the New Jersey 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.
Using the New Jersey Bankruptcy Exemptions to Keep Jewelry
If you used the New Jersey exemptions, you won’t be able to keep much of your jewelry. New Jersey doesn’t have a specific exemption jewelry (many states do), but does allow you to keep up to $1,000 total of any type of personal property or stocks and corporation interests. N.J. Stat. Ann. §2A:17-19. If you are married and filing a joint bankruptcy, you can double this amount, bringing your total exemption to $2,000. (To learn more, see The New Jersey Wildcard Exemption.)
New Jersey does allow you to exempt your wearing apparel, to an unlimited value. Some courts in other states allow debtors to keep watches, breast pins, cuff links, and sometimes even rings, under a wearing apparel exemption. This is unlikely to fly in New Jersey however. In 1868 a New Jersey court ruled that rings and jewelry do not fall within the wearing apparel exemption. Frazier v. Barnum, 19 N.J. Eq. 316 (1868).
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 a New Jersey 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.