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Can I Keep My Jewelry in Bankruptcy?

Everyone knows that the price of gold has skyrocketed over the past decade. During 2002 gold averaged around $300 per ounce, and by 2012 it climbed over $1,700 per troy ounce. Precious stones have also increased in value. An “average” 1 ct diamond sells for $10,000 more today than in 2002. These price increases can have a serious impact on your bankruptcy case.

During a Chapter 13 bankruptcy case you get to keep all of your jewelry, no matter the value. A Chapter 13 bankruptcy is funded by payments from your income. You pay what you can afford over three to five years. Any remaining debt is discharged at the end of the repayment period.

On the other hand, filing a Chapter 7 bankruptcy could put your jewelry at risk. That is because a Chapter 7 bankruptcy is a liquidation process. State and federal laws allow you to keep certain property that is reasonably necessary to your fresh start after bankruptcy. These laws are commonly called “exemptions” and protect your assets from creditors and from the bankruptcy trustee.

Before applying legal exemptions to protect your jewelry, you should accurately value each item. Keeping your jewelry may come down to providing the bankruptcy trustee with trustworthy evidence of its value. One way to do this is to have your gold jewelry appraised as scrap gold. The general rule is that the weight and karat of the gold determines its value. Ten-karat gold means that it has 42% gold content. Fourteen-karat gold is actually 58% pure gold and about 75% of the content of 18-karat jewelry is gold. Consequently, a 14-karat gold necklace weighing one troy ounce is worth 58% of the market rate (e.g. 58% of $1,700/ounce means that the necklace is worth $986).

Gold dealers have costs associated with buying gold and will typically only offer a fraction of the market value. One recent investigation found that bids from mail-away gold purchasers can vary from as little as 18% of market value, to a high of 90%! Many pawn shops openly display what they pay for scrap gold, so choose your appraiser carefully. A price that is too low will be disregarded and a value that is too high can put your property at risk.

If you have expensive jewelry and need bankruptcy relief, speak with an experienced attorney and discuss your options. In many cases the value of your jewelry can be protected by legal exemptions. In unusual cases you may consider filing a Chapter 13 bankruptcy, selling the jewelry before filing, surrendering the jewelry to the trustee, or purchasing the nonexempt equity from the bankruptcy estate. Before doing anything, get competent legal advice.