If you file for Chapter 7 bankruptcy in Utah, you may be able to keep heirloom jewelry, wedding rings, and other jewelry items that have sentimental value using the Utah heirloom exemption. The total aggregate value that you can protect is $1,000. If you file for Chapter 13 bankruptcy in Utah, you generally keep all of your unsecured property, including jewelry.
Keeping Jewelry in Chapter 13 Bankruptcy in Utah
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 unsecured 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 Utah
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.
Utah Bankruptcy Exemptions
Not all of your property is up for grabs, however. Utah (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 Utah is not one of these states. If you file for bankruptcy in Utah, you must use the Utah bankruptcy exemptions.
Using the Utah Bankruptcy Exemptions to Keep Jewelry
Unlike some states, Utah does not have a separate exemption just for wedding rings or other jewelry. Nor can you use Utah’s clothing exemption to protect jewelry; that exemption specifically states that it does not apply to furs or jewelry. But Utah does have one exemption that might apply to some or all of your jewelry – the heirloom exemption.
The heirloom exemption. If you file for bankruptcy in Utah, you can exempt up $1,000 in value in “heirlooms or other items of particular sentimental value.” Utah Code Ann. § 78B-5-506. If you are married and filing a joint bankruptcy, you can double this amount.
What counts as an heirloom or item of sentimental value? According to the only published case in Utah addressing this issue, an item of sentimental value is one to which the debtor has an emotional or sentimental attachment. In re Dillon, 113 B.R. 46, 50 (Bankr. D. Utah 1990). Gifts to commemorate special events, like weddings, anniversaries, birthdays, and the like, most likely fall into this category, said the court. To the contrary, an object that provides economic advantage, but doesn’t “tug at the heart of human emotion” would not be exempt. (In that particular case, the court did not allow the debtor to exempt a rifle and a car using the heirloom exemption.)
It’s likely that your wedding ring would fall within this exemption, unless perhaps you are divorced and no longer wear it. And your great grandmother’s ruby ring would probably be deemed an “heirloom.” Jewelry you received as a birthday, anniversary, or graduation gift from someone special might also qualify. However, the court was careful to state that sentimental value can arise from any number of scenarios, so it will depend on your particular situation. Check with a local bankruptcy attorney to see how the bankruptcy judges in your area view this exemption.
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 Utah 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.