Tag Archives: exemption

Worried About Losing Your Wedding Ring or Other Jewelry If You File for Bankruptcy?

ringsMost people who file for Chapter 7 bankruptcy don’t have a lot of expensive jewelry. But many own a wedding or engagement ring, or perhaps another special jewelry item, like great grandma’s ruby ring or grandpa’s cufflinks. And while bankruptcy is often fraught with more pressing concerns (Will I lose my home? Can I get that debt collector to stop hounding me?  What about that huge tax bill?), the possibility of losing your wedding ring, heirloom jewelry, or even just a special watch, necklace, bracelet, or pair of earrings can add more mental stress to the process.

Nolo’s New 50-State Series on Your Jewelry in Bankruptcy

So what does happen to those jewelry items when you file for Chapter 7 bankruptcy? As you’ll see below, the answer depends on where you live (or more accurately, which state bankruptcy exemptions you can use).  We outline some of the common ways that states allow you to keep some, or all, of your jewelry. But even more helpful is Nolo’s recently published 50-state (plus the District of Columbia) series on what happens to jewelry in your state.

Exemptions and Jewelry in Bankruptcy

In Chapter 7 bankruptcy 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.

Not all of your property is up for grabs, however. (In fact, most Chapter 7 bankruptcy filers give up little or no property.) Each state plus the District of Columbia 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 a set of state exemptions and the federal bankruptcy exemptions. Others only allow you to use state exemptions.  (Find out which bankruptcy exemptions you can use.)

Common Exemptions That You Can Use to Protect Jewelry

The exemptions that are available to you vary by state. Below are some of the types of exemptions that your state might have that you can use to protect jewelry.

Wedding and anniversary ring exemption. Many states allow you to keep wedding and engagement rings, no matter their value. Others put a dollar limit on your wedding ring. Still others don’t have a special exemption for wedding rings.

Jewelry exemption. Some states have a specific exemption that allows you to exempt jewelry up to a certain dollar amount. Some states can be quite generous in this exemption.

Heirloom exemption. Some states have an exemption for family heirlooms – sometimes to an unlimited value and sometimes up to a certain dollar amount. You may be able to use an heirloom exemption to keep jewelry that has been passed down to you from family members.

Wearing apparel exemption. Many states specifically state that you can keep your wearing apparel, often to an unlimited value. Some state bankruptcy courts have ruled that a debtor can exempt a moderately-priced watch, cufflinks, or other modest jewelry item under the wearing apparel exemption.

Wildcard exemption. A wildcard exemption allows you to apply a certain dollar amount to any type of property. If your state has a wildcard exemption (such exemptions can range from as little as $200 to as much as $25,000), you most likely can apply some or all of it to your jewelry.

Find the Jewelry Exemptions in Your State

To find the specific exemptions that relate to jewelry in your state, go to Nolo’s State Bankruptcy Information page and choose the link to your state. You’ll see a list of articles related to bankruptcy in your state, including an article on keeping jewelry.

Can I Keep Money in My Health Savings Account if I File for Chapter 7 Bankruptcy?

piggy bank stethoscope istockIf you file for Chapter 7 bankruptcy and have money left in your health savings account (HSA) or medical savings account (MSA) you may be wondering if you have to turn them over to the bankruptcy trustee. There are not many published court decisions on the answer to this question. But we do know that it will depend on where you file for bankruptcy and whether your state has an exemption for HSA or MSA funds. A new case from the Eighth Circuit sheds some light on how your court may rule.

Keeping Assets in Chapter 7 Bankruptcy

When you file for bankruptcy, most of your property becomes part of your bankruptcy estate. Your bankruptcy trustee has control over that property and can sell it for the benefit of your unsecured creditors.  Not all property is part of your bankruptcy estate, however. Bankruptcy law makes some exceptions. (To learn about those exceptions, see Property Not in Your Bankruptcy Estate.)

However, both federal and state laws list items of property that are “exempt” or safe from the trustee.  (Learn more about bankruptcy exemptions.)

Whether you can keep your HSA or MSA funds depends on:

  • whether the money is part of your bankruptcy estate (that is, does it fall within one of the exceptions), and
  • if it is part of the estate, whether you can exempt the funds.

Recent Eight Circuit Case: Cannot Keep HSA Money If You Use Federal Bankruptcy Exemptions

A recent decision by a Bankruptcy Appellate Panel of the Eighth Circuit Court of Appeals ruled on just this issue.

In that case, In re Leitch,  __ BR__  (B.A.P. 8th Cir. July 16, 2013), the court determined two things:

  • Health savings account funds are included in the bankruptcy estate. In so ruling, the court rejected the bankruptcy debtor’s argument that the funds were a health insurance policy and therefore not part of the bankruptcy estate under that exception.
  • Health savings account funds are not exempted in the federal bankruptcy exemption scheme. The debtor in this case opted to use the federal bankruptcy exemptions. The court rules that HSAs and MSAs are not exempt in the federal scheme.

To learn more about this case and the issue in general, see Nolo’s article Can I Keep HSA or MSA Funds in Chapter 7 Bankruptcy?

Are Your HSA or MSA Funds Safe in Chapter 7 Bankruptcy?

If you don’t live within the Eighth Circuit (Eighth Circuit states include Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota), it’s possible, but not likely, that your court will decide that HSA funds are not part of your bankruptcy estate. Check with a local bankruptcy attorney.

You may be able to keep your HSA money, however, if your state exempts those types of funds. At least six states specifically exempt health savings account money in Chapter 7 bankruptcy:  Florida, Mississippi, Oregon, Tennessee, Texas, and Virginia. And if your state does not have an HSA exemption, you can use any available wildcard exemption. (Learn more about wildcard exemptions in bankruptcy.)