In my role as a Colorado Springs Bankruptcy Attorney, it’s pretty rare for me to meet people who are living a truly luxurious lifestyle. But, under the Bankruptcy Code, some pretty commonplace things like vacations or dining at restaurants might be considered “luxuries”.
First let’s talk about what most people would consider to be luxuries: Jewelry. But don’t worry if you own some jewelry. Depending on its value, it will probably be exempt from being taken by the Trustee or your Creditors.
Under the Colorado exemptions, Colorado Revised Statutes, Section 13-54-102 (b), watches, jewelry, and articles of adornment up to $2,000 in value are exempt. In the case of a couple filing a joint petition, this amount is doubled to $4,000.00.
For most of the people I meet, this exemption is sufficient to protect their wedding and engagement rings, watches, bracelets and other jewelry. That’s because when we list assets on the bankruptcy schedules, we’re required to place a value on them based upon what each item would sell for at its current age and in its current condition.
We are not supposed to use the replacement value or the original cost of the item.
The other situation to be considered when we’re talking about luxuries is when the debtor purchases items on credit in the 90 day period before filing for bankruptcy. If the amount spent was more than $500.00 to any one creditor, like one particular credit card, then the debt may not be dischargeable.
So, what kind of things are considered to be luxuries in this situation: According to Section 523 of the Bankruptcy Code, anything that is not “reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor” is considered a luxury item.
Examples would include vacations, dining at restaurants, and just about anything else other than the bare necessities of life. So, in this situation we’re not talking about diamonds and furs. We’re talking about some of the regular things that people do to have fun, even though they’re not really luxurious items in the normal meaning of the word. That’s why I recommend that my clients not use a credit card for any purchases within 90 days of filing their case.
What we normally think of as necessities might be considered luxuries in the eyes of the Bankruptcy Judge.
Other non-Colorado Springs Bankruptcy Attorneys have also written about bankruptcy “L” words: