How to Properly Record the Debtor’s Jewelry on Schedule B of the Bankruptcy Petition

Almost every debtor filing bankruptcy will have some type of jewelry. But about 50% of them do not list the jewelry on their Client Intake Forms. Why? Because the average debtor translates the word “jewelry” into “expensive diamonds and gold.” In other words, many debtors do not think their dime-store necklace or wrist watch is worth anything.

As a trained paralegal or virtual bankruptcy assistant, your job is to uncover things like this. This is another reason why preparing bankruptcy petitions is not simply data entry. It requires skill and experience to uncover hidden assets not reported on the bankruptcy petition, and this article is written to help you start thinking along the right path to develop those skills.

The first thing you should do when you look at the Client Intake Forms is to review the market value the debtor’s entered for their jewelry. If there is no amount provided by the debtor’s then this should immediately throw up a “red flag” for you.

Immediately, you need to add several questions to your Questionnaire Sheet that is used to gather additional information from the debtors. Those questions would be something like this:

1. Do you own any type of jewelry, regardless of the value?

2. Do you have any neck chains, wrist watches, earrings, rings, or any type of jewelry?

If the debtor’s still claim they have no jewelry after asking them these two questions, there is nothing you can do except not to make a listing for jewelry on Schedule B. However, you should make a notation for your attorney to take to court, so that if this issue is brought up by the Trustee, the attorney can verify the debtor specifically stated they had no jewelry.

Just keep in mind that having no jewelry whatsoever is very rare. Almost everyone (women and men) at least have a watch. Almost all women have a set of earrings or a necklace. So make sure you fully explore this issue with the debtor in order to help them provide you with truthful and accurate information for the bankruptcy petition.

When you do discover that the debtors have some type of jewelry, you then need to get an accurate market value to record on the bankruptcy petition. Below are some tips to help the debtors arrive at an accurate amount:

1. Do the debtors make any payments on the jewelry they own? (If so, you will record the jewelry as a separate item on Schedule B and attach a lien to it; making sure you provide a very accurate description of the jewelry like: ½ caret diamond ring set in stainless steel with gold plating.)

2. If the debtors do NOT make payments on their jewelry, ask them to describe it to you. Where did they purchase the jewelry? If they bought it at a department store like Wal-Mart, the jewelry will probably have less value compared to purchasing it at an exclusive diamond store in the mall.

3. Ask the debtors to provide you with a value of all their jewelry if they were to sell it to the general public. Remember, you cannot determine the market value of jewelry to place on Schedule B. Only the debtor can do that? Why? Because you are not a certified jewelry appraiser, and even if you were, you could not determine the value of anything unless you looked at it. So make sure you do not try to “put words in the mouth of the debtor” when you are interviewing them to get this additional information.

Final Tip: As a paralegal or virtual bankruptcy assistant, you owe it to yourself to look at prices for everything as well as advertisements that come through the mail. Although prices differ in various areas of the country, by having a general knowledge of current prices for everyday items, it will assist you when you prepare Schedule B. Although you cannot provide a market value on your own, you will know if the price the debtors provide is out of line. For example: If a debtor listed a refrigerator with a market value of $3,000.00, you would know that by 2007 price standards, this amount is out of line and should be questioned.

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Disclosure: The information contained in this article is solely intended to increase the skills of paralegals and other legal staff who are employed virtually or non-virtually by bankruptcy attorneys. This information is not to be used by non-attorneys to prepare bankruptcy petitions for the general public. The information is solely intended to train legal professionals working under the direction of licensed bankruptcy attorneys.

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AUTHOR BIO:

Victoria Ring is a Certified Paralegal and Bankruptcy Specialist and was the first paralegal to develop the Virtual Bankruptcy Assistant field in 1999. She has also developed an entire line of training products and holds several seminars per year in drafting bankruptcy petitions. Her training materials have been approved by NALS, NFPA and the Supreme Court of Ohio for CLE credits. Additionally, Victoria Ring provides speaking and in-house training services for bankruptcy law firms. Visit her website at http://www.713training.com