Can I Keep My Jewelry if I File Chapter 7 Bankruptcy in Saint Paul, Minnesota?

Filing for chapter 7 bankruptcy is a great option for many Minnesotans who are struggling to manage their debts.  People who earn less than the median income, based on their household size, are permitted to file a chapter 7 bankruptcy case. The beauty of a chapter 7 case is that the debtor (what you call a person who files for bankruptcy) is not required to make payments to their creditors like they do in a chapter 13 repayment plan. The catch is that in some case, the debtor may have to turn over certain property for the trustee to liquidate (sell to convert to cash) in order to pay their creditors.  

Bankruptcy law provides that certain property is exempt, meaning that it cannot be taken to pay creditors. The law provides that the debtor may exempt certain basic necessary property, such as their primary residential home, a modestly-valued car, basic household goods, clothing, and etc. Other property that is not exempt, such as additional cars, excessive money in bank accounts, recreational vehicles, that the debtor does not need, may be taken by the chapter 7 trustee and liquidated to pay creditors. However, in most of these cases, the amount of nonexempt property the debtor has is relatively small, if any, and the trustee will often just allow the debtor to pay the trustee, often with a payment plan, to keep their property.

Jewelry often has great monetary value as well significant sentimental value. A debtor’s jewelry in many cases derives it sentimental value from the loved ones from whom the jewelry is gifted. Jewelry may be given to the debtor by their significant other, such as a wedding ring or engagement ring. It may also, for example, be inherited from a friend or family member who has passed. In any event, in these situations the debtor’s jewelry may have sentimental value that far exceeds its actual monetary value.  

The bankruptcy court recognizes the great monetary and sentimental value of jewelry, which is why jewelry is exempt up to a certain value under bankruptcy law. In Minnesota, a debtor may elect either the Federal bankruptcy exemptions or Minnesota State exemptions to protect their property, which often involves a bit of a complicated analysis best left to an experienced bankruptcy attorney. Under the Federal exemptions, a debtor may exempt all their jewelry up to $1,875. Minnesotans who choose State exemptions may only exempt wedding rings, and all other types of jewelry are not exempt. Wedding rings are exempt up to a value of $3,062.50 under State exemptions. Notably, the courts have ruled that engagement rings are specifically not exempt, as they are not actually “wedding rings,” but rather, are simply a gift conditional on the marriage actually occurring.

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When considering filing for bankruptcy it is always a good idea to first talk to an experienced bankruptcy attorney.  LifeBack Law Firm now has a new office located in the historic Cathedral Hill neighborhood of Saint Paul, specifically located at 370 Selby Ave, Suite 224, Saint Paul MN 55102. Come visit us there, or online, at lifebacklaw.com!