Can I keep my jewelry if I file for bankruptcy in Tennessee?

Find out if you can keep your wedding ring, bracelets, watches, earrings, necklaces, and other jewelry in a Tennessee bankruptcy.

You can keep wedding rings, bracelets, watches, necklaces, and other jewelry in a Tennessee Chapter 7 bankruptcy if those items are “necessary and proper.”  You can also apply all or part of the Tennessee wildcard exemption (currently $10,000) to jewelry. If you file for Chapter 13 bankruptcy in Tennessee, you can keep all of your property, including your jewelry.

Keeping Jewelry in Chapter 13 Bankruptcy in Tennessee

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 Tennessee

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.

Tennessee Bankruptcy Exemptions

Not all of your property is up for grabs, however. Tennessee (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.)

Some states allow you to choose between the state exemption system and another set, called the federal bankruptcy exemptions. But Tennessee is not one of these states. If you file for bankruptcy in Tennessee, you must use the Tennessee bankruptcy exemptions.

Using the Tennessee Bankruptcy Exemptions to Keep Jewelry

In Tennessee, you can keep jewelry using the below exemptions. If you are married and filing a joint bankruptcy, you can double these amounts.

Wearing Apparel Exemption

In Tennessee, you may exempt all “necessary and proper” wearing apparel for you and your family. Tenn. Code Ann. § 26-2-104. Several Tennessee bankruptcy courts have stated that jewelry comes within the definition of wearing apparel for this exemption. See In re Lebovitz, 360 B.R. 612, 623 (Bankr. App. 6th Cir. 2007), In re Hazelhurst, 228 B.R. 199, 201 (Bankr. E.D. Tenn. 1998). However, although the wearing apparel exemption has no dollar cap, there are limits to what you can claim as exempt. Courts focus on the words “necessary and proper” in the language of the statute when deciding if a debtor can keep an item of jewelry.

One court outlined factors that courts might consider in determining if an item of jewelry is necessary and proper, including:

  • what the item are (for example, are they commonly worn, such as rings, earrings, bracelets, watches, and necklaces?)
  • how often the debtor wears the jewelry
  • what social or business events require the debtor to wear the jewelry, and
  • the value of the jewelry (which could indicate that the jewelry is a luxury item).

In re Hazelhurst, 228 B.R. 199, 201 (Bankr. E.D. Tenn. 1998). In applying these factors, the court ruled that the debtor could keep the amethyst ring that was handed down from her grandmother and that the debtor wore weekly. However, the court did not allow her to exempt other items of jewelry that she no longer wore.

In a more recent case, the Bankruptcy Appellate Panel of the Sixth Circuit ruled that a debtor could not exempt the following items: an $8,000 diamond wedding ring and other diamond jewelry (earrings, tennis bracelet, and Cartier watch) with a combined total value of approximately $14,000. In re Lebovitz, 360 B.R. 612, 623 (Bankr. App. 6th Cir. 2007).  All of these jewelry pieces, said the court, were luxury items; that is, the value of each piece was far more than the value of a similar item that could serve the same function. For example, said the court, the debtor could make do with a modest watch if she needed to tell the time, and didn’t need a $1,500 Cartier watch for her fresh start.

Wildcard Exemption

If you do have an expensive item of jewelry, you may be able to keep it in a Tennessee bankruptcy by using the wildcard exemption. That exemption allows you to exempt up to $10,000 of any personal property. Tenn. Code Ann. § 26-2-103.You can use all or some of this $10,000 to protect jewelry.

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 Tennessee 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.

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