When a debtor faces the prospect of losing a large deal of their property to their creditors during a bankruptcy, some initial concerns may be raised. Especially in the situation of small business owners, manual laborers, and machine-dependent farmers, having to forfeit certain pieces of property would essentially destroy a debtor's ability to rebuild their life financially. However, in order to protect workers from these sorts of situations, many jurisdictions have enacted a special bankruptcy law that protects what are known as tools of the trade.
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Even though the details of the law may differ between states, tools of the trade statutes provide the same basic requirements for debtors. Generally speaking, a property must be considered necessary for the debtor's business in order to be considered exempt from the bankruptcy process. One commonly cited example is that of a car used to commute to work every day. While the car is used regularly to get to work, it is not essential to complete the work itself. Additionally, a driver may be able to use public transportation in order to arrive at work on time. Therefore, the vehicle is not protected under these statutes.
Another main concern for debtors under these statutes is the type of tools that are provided for in the law. The laws are written with a certain amount of intentional vagueness, as each field of work may require a different tool to complete each job. For a carpenter, it would be unthinkable to lose basic power and hand tools. For a farmer, the loss of a tractor could be devastating to daily operations. In the case of a soldier, tools of the trade statutes extend to all government-issued materials, including any uniforms and necessary weapons or items associated with military service.
To learn more about your state's tools of the trade laws, contact a bankruptcy attorney.
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