Home Bankruptcy Exemptions Make Sure You Know the Tools of Trade Exemption

Make Sure You Know the Tools of Trade Exemption

Make Sure You Know the Tools of Trade Exemption

Chapter 7 exemption laws have been established in order
to ensure that an individual who chooses to file for bankruptcy does not have
to give up all of their valuables and important personal belongings. In their
breadth, Chapter 7 exemption laws protect a wide range of objects,
including homes, motor vehicles, jewelry, and tools of trade.
 

The Federal Government
exempts up to $1,750 worth of tools of trade. The term
tools of
trade
refers to
any group of items an individual uses for work, or any property that is
essential to a petitioner’s small business. Tools of trade themselves may
incorporate a wide variety of objects. Depending on a petitioner’s career, this
Chapter 7 exemption may include books, computers, motor vehicles, or paint brushes.

If an individual can prove that his/her motor vehicle is
essential for work, they may be permitted to protect the vehicle under the
tools of trade exemption, as opposed to the motor vehicle exemption. This may
be beneficial to a petitioner because, in many states, the tools of trade
exemption offers more monetary protection than the motor vehicle exemption.
However, this Chapter 7 exemption is generally only successful in protecting
motor vehicles when a petitioner utilizes the vehicle to make deliveries
or makes a living as a traveling salesman.

While most petitioners are required to protect their
computers and other electronic devices under the Chapter 7 exemption for
personal property and household goods, petitioners who
are employed
as computer technician
s will likely be permitted to protect their
computer under the tools of trade exemption.

The Federal Government
and state governments recognize that many individuals are self-employed and
utilize personal possessions in the course of making an income. Stripping
petitioners of the items that are essential for their job would only hinder
their ability to secure an income. Without a steady income, an individual is at
risk for financial trouble and may once again accrue extensive debt. Therefore,
it is essential to protect any property that may be beneficial in establishing
an income.  

 

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