Before bankruptcy, I tell my clients to stop the automatic withdrawals to those internet payday loans. They always find it’s so hard to get their banks to help. Today’s New York Times says the same thing. The Times says that’s because the banks love those overdraft fees.
Before bankruptcy, sometimes you need to borrow money from Mom. You might want to borrow that money and put her on your car title.
Now Congress made it illegal for me, a bankruptcy lawyer, to advise you to borrow money. But the Supreme Court said it’s legal for me to tell you that it’s legal for you to do it. (You may have to read that twice.)
Last fall, Judge Robert Mayer, our bankruptcy judge in Alexandria, tossed out the bankruptcy of a guy for lying on his forms about the value of jewelry. This was a guy who owed a lot–upwards of $300,000–and he’s now stuck.
This was an extreme case–the guy had spent way over $100,000 on jewelry within two years of the bankruptcy. (This is one reason I like the specific Experian report I want you to get. experian.com/reportaccess. That report gives me your balance history going back two years. So if you put $100,000 on a jewelry credit cards–I’d know.)
Valuing jewelry at 2 cents on the dollar got this bankruptcy thrown out. About 12 cents on the dollar would not.
He valued it at about $2000. Now Judge Mayer said the used value of jewelry is certainly not what you paid–but it’s a lot more than two cents on the dollar.
Judge Mayer said the guy knew about what it was worth. About 12 cents on the dollar. How did he know? Because right before he filled in his bankruptcy forms, he had sold some of it. (That’s one of the many reasons I ask you on my forms what you have given away or sold in the last two years. And why its a good idea for you to answer that question.) He lied to the court about selling stuff too.
If this guy had put down the jewelry was worth $10,000, instead of $2000, his bankruptcy probably would have been approved. (And told the court he had sold some of it.) That was a mistake that cost him any chance he will ever have of getting out of debt and back to good credit.
How should you value your jewelry? One way Judge Mayer says, is to take it to a pawn shop or look on Ebay for similar stuff. Another way would be to take 15% of the retail price. That should be an amount that Judge Mayer will be happy with. And unless you spent $100,000 on it, it should be an amount we can protect.
This guy had a very complicated situation; sometimes people with complicated situations want to come in and talk, instead of filling in my forms, and then coming in to talk. The forms are important.