Will the Trustee take all of my tools if I file Bankruptcy?

Will the Trustee take all of my tools if I file Bankruptcy?

Or can I exempt them as Tools of the Trade?

Under the Kansas bankruptcy exemption statute, every person is entitled to claim “books, documents, furniture, instruments, tools, implements and equipment, breeding stock, seed grain . . . reasonably necessary in carrying on the person’s profession, trade, business or occupation.”

To determine if your property can be exempted as a Tool of Trade, you must consider:

1)      Does your property actually qualify as a Tool of Trade?

2)      What is the value of the property and how did you reach that valuation?

3)      Will you attempt to avoid a lien attached to the property?Your tools may be exempt!

4)      What is your trade or occupation?

For property to qualify as a Tool of Trade, it must somehow be related to your business. However, this alone may not be enough. For example, you may use your truck in your construction business, but you could also use it for many other things – so the exemption is unlikely to apply. If you have specially adapted your truck in some manner though, you may be able to use this exemption.

It is clear from the statute that the amount of the claimed exemption may not be over $7500 per person. How you reach that valuation; however, is not so clear. Options include retail, auction, or cost. If a dispute arises regarding valuation an evidentiary hearing will be required, leaving the court to decide.

The proper valuation of the property is not only important in regards to the statute’s limitation, but its interplay with lien avoidance. Section 522(f)(B) of the Bankruptcy Code allows you to avoid certain types of liens related to your Tools of Trade. So, you can understand why a creditor would want a proper valuation — there is a chance that you, as a debtor, may be able to get out of paying up to $7500 ($15,000 for joint filers) worth of debt for which you would otherwise be responsible.

Finally, you should generally be engaged in your particular trade or occupation at the time of your bankruptcy filing. How long you have been involved in your particular trade, how many hours you spend working your trade and if you plan to continue your trade can also be at issue.

The use of the Tools of Trade exemption is fact driven and your particular situation is unique. The best way to find out if you are going to be able to keep your tools is to schedule your free, no obligation bankruptcy consultation with a Kansas City Bankruptcy Attorney today.

2017-07-17T20:57:06+00:00 By |Bankruptcy FAQ|