21 Sep Bankruptcy and Collectibles … What Can You Keep?
Many Chapter 7 bankruptcy debtors worry that they will loose all their belonging, including their “valuable collectibles”. Depending on how you look at it, many debtors turn out to be lucky because they get to keep their collections. That is because most collectibles have little resale value and fall within the allowed exemptions in bankruptcy. Many of my clients are worried when they report that they have very expensive collections of baskets, figurines, gnomes, paintings and other collectibles. For those individuals hoping to be able to retire from the sale of their collection, they usually get a rude awakening. But for my clients that collected simply because they appreciated the items, they are relieved to know that they get to keep their beloved collection.
Whether it is Hummels, Longaberger, Thomas Kincaid, or other well known collectibles, these items are often mass produced for many years so that the secondary markets don’t result in high returns. And don’t even fret about those Beanies Babies since you might be lucky to get $1.00-$2.00 for them, and I have never seen a trustee take one! Many Chapter 7 bankruptcy trustees are simply not interested in selling these items off. In an article 5 Completely Worthless Collectibles (The Street) by Jason Notte the author explored the failure of many collectibles to pay off as investments.
Chapter 7 trustees are charged with looking into the debtor’s assets and gathering up property that exceeds the debtor’s exemptions. He/she will sell non-exempt property to apply towards the debts, but the trustee also has to consider how much it will cost to administer a bankruptcy case. Many trustees won’t attempt to distribute funds to creditors unless they can cover their costs and give a dividend to the creditors. The cost of administration alone is normally around $1,000.00 so many trustees look for at least that much, plus enough to give at least a little something to creditors.
If someone does have valuable items, it they fall within the applicable state exemptions then the debtor gets to keep them. If they have more than allowed, the debtor gets to choose which of their items they claim as exempt. They may be able to work out a deal with a Chapter 7 trustee to buy back the items from the estate if the debtor has the ability to get the funds to do so. Alternatively, a Chapter 13 case might protect those items from creditors and allow debtors the opportunity to make payments over a period of up to five years to keep the valuables.
So if you are considering bankruptcy and are worried about your collectibles, first get an clear idea of what the true resale values are and then consult an experienced attorney to determine if your state’s exemptions protect them.
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