If you have lost your job, or when you are facing financial hardship, you may have looked for creative ways to generate money. Many of my clients use eBay or other auction services to sell off valuables and here in the Atlanta area a number of “jewelry liquidators” (which are essentially high end pawn shops) have opened to service the needs of middle to upper income level clients who need a discreet method to sell or consign jewelry, electronics, paintings, etc.
I have also had clients tell me about barter organizations which allow members to trade services and generate “trade dollars” that can be used within the network.
When happens, therefore, when you make the decision to file bankruptcy and you have for example:
- $3,000 in your PayPal account
- $2,500 in trade dollars with a local barter association
- paintings you value at $5,000 on consignment at a local art gallery
Here are my thoughts:
First, any cash equivalent currency like PayPal or trade dollars is considered an asset. Perhaps at one point PayPal might have been considered as an illiquid form of currency but currently, PalPal functions almost exactly like cash. Since you can transfer funds from your PayPal account directly into your checking or savings account, I value PayPal funds like cash, with no discount for lack of liquidity. PayPal funds should be listed at full value on Schedule B of your petition.
In my view, barter dollars should not get the same treatment as PayPal funds. Barter dollars are much less liquid and they are only valuable within a particular network. Generally these trade dollars carry about one-third to one-half the value as official United States currency so it is my practice to discount the value of barter dollars on Schedule B. I do disclose the face value and reveal my discount calculations. Trade dollars should be listed on Schedule B because they are assets.
Consigned items such as paintings or jewelry should also be listed on Schedule B. I generally advise my clients to take such items to a pawn shop to get a retail valuation. I like to come to my 341 hearings with written valuations that support what I have included on Schedule B. In my experience, some trustees will send their own appraiser out to look at paintings, jewelry and other unique items but if you offer reasonable evidence as to valuation, many trustees will accept your valuations as accurate.
Note that you must reveal assets that you own but are in the hands or control of another person.
So, the bottom line with regard to cash equivalent assets – I think you can discount for an absence of a ready market to liquidate, but you have to reveal these assets and offer evidence and/or explanations for your valuations.
Jonathan Ginsberg, Esq.
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Last modified: April 30, 2011