Can I keep my jewelry if I file for bankruptcy in Pennsylvania?
How much jewelry you can keep in a Pennsylvania bankruptcy depends on which exemptions you use.
Whether you can keep jewelry, watches, and wedding rings in Pennsylvania depends on what type of bankruptcy you file (Chapter 7 or Chapter 13), whether you use the Pennsylvania or federal bankruptcy exemptions, how much the jewelry is worth, and whether you need to protect other assets as well.
As compared to other states, the Pennsylvania exemption you can use to protect jewelry is quite stingy. But if using the federal exemptions makes sense in your case, you’ll be able to protect more of your jewelry.
Keeping Jewelry in Chapter 13 Bankruptcy in Pennsylvania
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 Pennsylvania
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.
Pennsylvania Bankruptcy Exemptions
Not all of your property is up for grabs, however. Pennsylvania 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 Pennsylvania, you can choose to use either the Pennsylvania 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 Pennsylvania bankruptcy exemptions and the federal bankruptcy exemptions.)
Keeping Jewelry 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 Under the Pennsylvania Bankruptcy Exemptions
In Pennsylvania, there is no separate exemption for jewelry. But you can use the below exemptions to keep a very small amount of jewelry.
- Wildcard exemption. You can protect up to $300 of any type of personal property or cash. You may use some or all of this to exempt jewelry. If you are married and filing a joint bankruptcy, you can double this amount. Needless to say, Pennsylvania’s exemption is not particularly generous and doesn’t allow you to keep much in the way of jewelry.
- Clothing exemption. Pennsylvania does allow you to keep your clothing, to an unlimited value, in bankruptcy. You might be able to include some modest pieces of jewelry in this clothing exemption. In the only reported case in Pennsylvania to discuss this issue, the court found that an expensive diamond ring could not be exempted as “wearing apparel.” In re Gemmell, 155 F. 551 (D.C., W.D. Pa. 1907). However, this court did note that other courts across the nation have ruled that moderately-priced watches might be exempt as wearing apparel. One court even exempted a diamond stud, but only after the owner was able to show that he “had worn it for a number of years to fasten his shirt bosom together.” (These cases offer an amusing window into the world of gentleman’s clothing in the early 1900s. There is talk of bosoms, gold-fringed epaulets, shirt studs, stick pins, cravat rings, cuff buttons, watch chains, fob chains or ribbons, and cigar cutters attached to ribbons or chains, and worn as charms. With the happy introduction of buttons, it’s not clear how the “bosom” fastening argument would fare today.)
Other Ways to Keep Jewelry in Pennsylvania 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.