Bankruptcy Lawyer Explains When A Person May keep Financed Jewelry In A New Jersey Chapter 7 Case
An asset must be protected from the trustee and the financing creditor in a New Jersey chapter 7 bankruptcy case. It is unlikely that a chapter 7 trustee will sell the debtor’s jewelry. A trustee may only sell an asset that is not totally exempt. I have explained how exemptions work in bankruptcy and when an asset is not totally exempt. Jewelry is an asset, which is generally 100% exempt. However, if the jewelry has substantial value, in excess of the financing payoff amount, it is possible that a trustee may sell the jewelry.
Additionally, a debtor must consider when and how the financing creditor may repossess the jewelry, assuming that the trustee will not sell the item. Typically, if a person obtains financing to buy jewelry, the financing creditor is granted a security interest in the jewelry. The secured interest is granted by way of a “Purchase Money Security Interest”, which is special financing of property that is used to purchase a non-real estate asset. A security interest grants the financing creditor a lien in the jewelry.
In a chapter 7, in New Jersey, the secured debt and personal liability that is owed to the jewelry financing company is typically discharged. Discharged means that the debt is eliminated. However, the finance company’s lien is not effected by the bankruptcy discharge. This means that the finance company may not sue the debtor, for the money that is owed, after the bankruptcy case is discharged and completed. However, after the completion of the bankruptcy case, the finance company may pursue the repossession of the jewelry, if the payments are not current.
If a debtor falls behind with the payments, the finance company may file a state court civil action to obtain possession of the jewelry, but can never purse a civil action to collect any money that is due on the debt. The enforcement of their lien is called a “Replevin Action”, which is a state court civil lawsuit for a court order requiring the debtor to turnover the jewelry. Please note that the creditor may not pursue the “Replevin Action” if they believe that the lawsuit is not worth the attorney’s fees and costs. Also, a debtor may wish to voluntarily give back the piece of jewelry to the finance company.
You may contact Robert Manchel at 866 503 5644 for NJ. bankruptcy inquiries.