The prospect of bankruptcy raises countless questions, especially about what assets you can keep. For many, the most crucial assets are not fancy cars or expensive jewelry but the tools they rely on daily to earn a living.
In general, bankruptcy laws aim to give you a fresh start while ensuring you can continue working and supporting yourself. This usually means that your tools of the trade are exempt from seizure during bankruptcy proceedings.
What work-related assets can you keep?
Bankruptcy exemptions are applicable to both Chapter 7 and Chapter 13 bankruptcies. They typically include:
- Up to $5,000 worth of tools, equipment and books used in your trade or profession
- One computer and one printer
- One bicycle
- A vehicle worth up to $6,000
These exemptions apply to items directly used in your profession. For instance, a carpenter may retain their saws, hammers and other hand tools. Similarly, a mechanic could keep their wrenches, diagnostic equipment and toolboxes.
It is important to note that these exemptions have limits. If your tools exceed the allowed value, you may need to surrender some items or pay to keep them. Also, some high-value items might not qualify as tools of the trade.
Federal bankruptcy laws also offer safeguards for work-related items up to $2,800. In Arizona, you need to use state exemptions rather than federal ones, but it is helpful to understand both sets of rules.
How can you protect your work tools?
When filing for bankruptcy, you must accurately list and value all your possessions, including your work tools, in your bankruptcy forms. Accurately estimate the current market value of each item and ensure full disclosure of all assets. Attempting to hide assets can result in severe legal consequences and may lead to the forfeiture of your bankruptcy protection.
Do not risk jeopardizing your livelihood. Seeking legal advice early in the bankruptcy process significantly increases the likelihood of retaining your essential professional equipment and achieving the fresh start you need.
