What Happens to My “Tools of the Trade” in Bankruptcy?
Potential bankruptcy clients who have work tools are, understandably, concerned about losing those tools when they file for bankruptcy. Mostly, they just want to know if they are going to be able to keep the tools that they use regularly in their efforts to make a living.
When a debtor files bankruptcy he/she must list all his/her assets, including any work tools. While many old tools really aren’t worth much if they were sold to a third party, an appropriate valuation of the tools must be done.
Generally, the tools are not worth what was paid to obtain them in the first place, but rather are valued at their current condition, considering the wear and tear and age of such tools.
In a Chapter 7 bankruptcy, if the debtor has enough available bankruptcy exemptions to cover up the value of the tools, then the debtor gets to keep them.
In a Chapter 13 bankruptcy, the debtor gets to keep the tools even if they are not fully exempt but is required to pay to the unsecured creditors (credit cards, medical, etc.) what those creditors would have received if the tools had been liquated in a Chapter 7 case.
In Kansas Bankruptcy
The Kansas bankruptcy exemptions allow a debtor to keep “the books, documents, furniture, instruments, tools, implements and equipment, the breeding stock, seed grain or growing plants stock, or the other tangible means of production regularly and reasonably necessary in carrying on the person’s profession, trade, business or occupation in an aggregate value not to exceed $7,500.” Kansas Statute § 2304(e).
As you can see, there’s a significant exemption amount available for tools of the trade. To be able to use that exemption the debtor must have lived in Kansas for at least two years prior to filing bankruptcy. Additionally, the debtor must own the tools of the trade personally, and thus would not be able to claim the exemption if the tools were owned by an LLC or corporation that was owned by the debtor. The exemption might not apply if less than half of the debtor’s income comes from the work performed with the tools.
In Missouri Bankruptcy
The Missouri bankruptcy exemptions allow a debtor to keep “any implements or professional books or tools of the trade of such person or the trade of a dependent of such person not to exceed three thousand dollars in value in the aggregate.” Missouri Statute § 413.430(4).
You can see there is a smaller exemption for tools of the trade-in Missouri than there is in Kansas. To be able to use the Missouri tools of the trade exemption, the debtor must have lived in Missouri for at least two years prior to filing bankruptcy. The debtor must own the tools of the trade personally, and thus would not be able to claim the tools of the trade exemption if the tools were owned by an LLC or corporation that was owned by the debtor.
Please contact one of our experienced attorneys at WM Law to determine if your tools of the trade will be safe in bankruptcy or visit our Website at www.kansascitybankruptcy.com or call for a free initial consultation to evaluate your situation. At WM Law, we are here to help.