At our office, we've noticed that merely having to list some specific assets cause clients to occasionally worry.
People care about their stuff, it's only natural. We get it. However, we're more concerned about the bigger picture: Getting YOU out from under the suffocating debt that pushed you to seek help in the first place being our primary bullet point.
And helping you is what we do. So we'll tell you the truth.
In these instances we have to be firm about what will happen to a high value asset, like a Rolex watch, and why it's not worth jumping back into the arms of your creditors trying to keep it. Or worse, trying to hide it from the Trustee.
Joseph put it like this:
"But what about my Rolex in my Chapter 7 Bankruptcy?"
Well, what about it?
Bankruptcy is no fun, none. And people who file bankruptcy should look at it the same way they look at a root canal; they should know it's no fun, especially compared to the pre-2005 Chapter 7 Bankruptcy process. And they have to play by all the rules, or risk their discharge or jail time.
Okay, lecture over. So what happens to the Rolex Watch in a Chapter 7 in Phoenix, Arizona, or anywhere in Arizona?
First, the exemption won't cover it; your exemption for a watch is about a hundred dollars, and that'll work fine for a used Timex, but a Rolex, even used, and even not ticking, is probably worth five grand or so.
The exact number is always in flux, because we're in a depression, and because Invicta makes a watch that's essentially identical to a Rolex for about a hundred bucks (it's also water resistant to the same depth as most Rolexes, and they come in automatic, which is what they call a watch that winds itself when your wrist moves)(and no, I don't get a commission on Invicta watches, but I sure like mine!).
That said, it depends. Some people sell their watch (which, at $5,000 or so, won't be exempt) to buy six months of food, fuel and provisions, which are exempt under the statute in Arizona (and by the way, if anybody can tell me exactly what "provisions" are, I'll be very grateful).
They need to list the sale on their statement of affairs, and be prepared to show the bankruptcy trustee exactly where they spent the money. If they sold the Rolex to a family member, or anybody else, for that matter, they must also be prepared to demonstrate that the sale price was more-or-less fair market value (DO NOT sell the Rolex, or the Corvette, or the $30,000 diamond ring, to a relative for a dollar. It's a clear fraudulent transfer, and it will bite everybody involved in the rear)(and DON'T GIVE the Rolex, Corvette, or the $30,000 diamond ring to a relative or anybody else for Christmas; ditto).
Anybody who does any pre-bankruptcy planning must remember the adage, "Pigs get fat, and hogs get slaughtered", which is most of the guidence provided by the caselaw on pre-bankruptcy planning. Both Judge Haines and Judge Curley have written instructive cases on the topic, and I'll post them when I get a Round Tuit (as opposed to a Square Tuit).
On the other hand, if a debtor files and lists the Rolex (and God Forbid they fail to list it, because they're risking their discharge and a jail sentence, and it ain't worth it, because they can just go to Amazon and get their Invicta!), the trustee will politely ask if the debtor wants to buy it back from the estate, or if he just wants it sold to pay administrative costs and creditors.
Some debtors become indignant at this suggestion, saying "But if they know you're broke, how can they request that?"
Well, it's not a request. A Chapter 7 provides an honest debtor with a fresh start, but nobody ever said it had to be a comfortable process (see "root canal", above).
And in general, if a debtor is attempting to discharge five million in debt relating to real estate (a not uncommon Arizona bankruptcy debtor) he probably ought to balance the inconvenience against the prospect of trying to pay the five million; and figure that if the Rolex goes into the estate, it's about the size of a tip. Paid by Jack Benny (this is an old person joke; if you have trouble with it, just move on along; nothing to see here).
Some debtors have pawned their Rolex; they need to list the pawn shop as a secured creditor, and if the amount owed the pawn shop is more than the trustee believes he can get from a sale of the rolex, the trustee might not object to the abandonment of the watch.
Of course, even if it's abandoned from the bankruptcy estate, so that the trustee has no further claim to it, the debtor is going to have to find money to pay the pawn shop to redeem the watch.
