My BK and my fiancee's engagement ring

[JimH]

A couple months ago I bought an engagement ring. It was paid with a funds transfer from a checking account - not on credit. Shortly after receiving it, I gave it to my fiancee. I own a construction company (c-corp) and have been in a financial mess for three years because someone else filed bankruptcy on my company. Up until now, I've always been able to work things out with the various creditors to keep in good standing but since getting engaged a couple projects fell through so it looks like my company and I are going down for the count this time. Would this be considered a fraudulent transfer? There is a definite paper trail so I can't pretend like it never happened or that it cost less than it did. If I file bankruptcy (preferably ch 7, but I might not pass the means test), will she have to give up the ring? After all, I gave it to her and she is under no obligation to give it back.

[StaciMM]

It will probably be an issue-just as if you gave her the money that paid for the ring. A trustee will make her hand it over if you file ch. 7.

If you file ch. 13, it shouldn't be an issue.

Last thought... Have you started looking into your state's exemptions? I don't know if you can exempt something you gave away, but its worth exploring.

[HopeinHorizon]

that is a good question, and will keep myself updated with the answers, because I think I will be receiving a ring soon...

I am the one that filed though, and I am done with 341 hearing and everything. If I do receive a ring before discharge, can they come back and try to take it from me, even though I didn't purchase it??

[StaciMM]

Different situation... You can't transfer assets prior to filing bankruptcy. Pretty much, anything you own at the time of filing is part of your bankruptcy estate. Anything you transferred to an 'insider' or for less fair market value can be called back.

I don't think it would be an issue to receive an engagement ring after filing bankruptcy, but giving one shortly before filing (or within a year-possibly longer) could be an issue. Especially if it is a signficant value. Say you put $10,000 into a ring and gave it away, that is $10,000 you could have paid your creditors.

Of course, if the OP & his fiance get married & file jointly, it wouldn't be an issue-as long as they can exempt the ring-since their bankruptcy estate would include his, hers, and theirs. (Some states exempt engagement/wedding rings without a value limitation, others may have a wild card. I don't know that it would be possible to exempt-just thinking out loud here...)

that is a good question, and will keep myself updated with the answers, because I think I will be receiving a ring soon...

I am the one that filed though, and I am done with 341 hearing and everything. If I do receive a ring before discharge, can they come back and try to take it from me, even though I didn't purchase it??

[StaciMM]

You know, if you're holding out hope for that proposal you made in the missing post, I think you are the one supposed to GIVE a ring, not get one.

I couldn't hold back...

that is a good question, and will keep myself updated with the answers, because I think I will be receiving a ring soon...

I am the one that filed though, and I am done with 341 hearing and everything. If I do receive a ring before discharge, can they come back and try to take it from me, even though I didn't purchase it??

[JimH]

Last thought... Have you started looking into your state's exemptions? I don't know if you can exempt something you gave away, but its worth exploring.

I have looked at the exemptions. In Ohio jewelry is $400 for one item, $200 per item for the rest, $1,500 total jewelry if using homestead exempt, $2,000 total if not using homestead exempt.

I might be in a little trouble because I paid $3,500. I hope I can work it out or I'll have to buy her a straight jacket and some rubber room time as a replacement.

[HopeinHorizon]

I dont understand your last post, staci...

[StaciMM]

Didn't you make a joking proprosal here to someone the other day?

I dont understand your last post, staci...

[StaciMM]

Jim-

The jewelry total counts toward your total personal exemptions.

Do you think you'll end up being in a ch. 13? (Do you have something remaining, if you didn't count credit obligations, when you subtract expenses from income.) If so, its not going to be a major issue. If you do end up in a ch. 7, you could probably make arrangements to pay the trustee for it.

[BassBoy]

This may be a shot in the dark here, but does an item such as an engagement ring appreciate or deperciate once it's purchased? I ask for myself because 3 years ago, I purchased a brand new drumset with cymbals and before I put a value for it on my exemptions, I called around and got a good idea of what the drums were worth.....and the value was nowhere near what I paid for them. So, my question to you is, "Is the ring worth more or less than what you paid for it?"

[HopeinHorizon]

STACI-

Yea I forgot about that post... haha, but no in REAL life I have been dating someone for 6 years...

I didn't know what you meant by missing... what did happen with that post is that the one that got out of hand, I never read any of the responses... Now I feel bad, I was just playing around....

[JimH]

Jim-

The jewelry total counts toward your total personal exemptions.

ah yes you are right. Those numbers are for the total personal exemptions.

As far as which way to go 7 or 13. I'm not really sure I'll have a choice in that with the new "means test". It's complicated because I decide how much salary the corp pays me. Plus the corp has its own retained earnings, which can be manipulated depending on several different methods of allocating work in progress. All of which is in my control. With the 6 month look back I do technically qualify for a ch 7 since I hit a real lean income period the second half of the year. My pay draws from the corp plus the corp's retained earnings for the same period are under the threashold. The lean second half is why I'm in this position to begin with or I'd just keep juggling all of the debt like I have been for the last three years. If they look further back though, I may have to go 13. They used to be able to look back further, but under the new BK code they may be bound to only consider the last 6 months.

[StaciMM]

Jim-

Its probably best that you consult w/ a few attorneys. Since you have business dealings, you'll want to ask around and make sure that the ones you 'interview' have experience there.

Bassboy-
Since it was just a few months ago, I don't think depreciation could be argued. And, there is 1st the question of transferring assets.

[JimH]

Jim-

Its probably best that you consult w/ a few attorneys. Since you have business dealings, you'll want to ask around and make sure that the ones you 'interview' have experience there.

Bassboy-
Since it was just a few months ago, I don't think depreciation could be argued. And, there is 1st the question of transferring assets.

Yeah I got a reference today from a corporate attorney that I use on occasion. I can't talk with the Bk attorney until Tues. I look forward to talking with an atty even though under the new BK Act attorneys are now prohibited from giving certain advice pertaining to taking on more debt to protect assets in a BK. They can't even suggest that you trade in a debt free car that you would normally lose through the bankruptcy for one with a loan that you wouldn't lose.

[AAAArt]

Jim-

Bassboy-
Since it was just a few months ago, I don't think depreciation could be argued. And, there is 1st the question of transferring assets.

Jim, I'm going to disagree here. I'm not very familiar with the new laws. I believe that you have to state more realistic values than garage sale values. However, that ring is not worth near as much as you paid for it. Not being sarcastic, but consider it like a car. We used to be able to take Kelly Blue Book's low (trade-in value) on a car, now I think that you have to use one of the higher values. BUT, look at what they say a dealer would sell a car for vs. what you paid for it. Depreciates the minute you drive it off of the lot. The same with the ring. Even the jeweler whom you bought it from, could not sell it now for what they charged you because it is used. I would go to the jeweler and ask them to appraise it in some manner consistent with what the new law states.
The time frame is a problem, but shouldn't be an insurmountable obstacle.
Best wishes, Art
Staci, As my late, former father in law told me when I got engaged, "Art, it's not the initial cost that'll kill you, it's the upkeep"
Seriously, I think that there has to be some allowance for depreciation, because many items cannot in any way be sold for what we paid for them. BTW, my ex-wife was just the opposite. When she decided to trade me in on a newer model, it cost me a lot more than it did when we got engaged.
Art