What are your tools of the trade?
If you declare bankruptcy, one of the things you may naturally worry about is how that filing is going to impact your ability to earn a living. You know that Chapter 7 means liquidating assets. However, are you going to have to sell the tools you use to make a living right now?
You should not have to. The tools of the trade are protected as a common bankruptcy exception. Now, this may only apply up to a specific value, so be careful about claiming too many items as tools of the trade. At the same time, though, you can expect the most critical items to usually be exempt from the liquidation process.
Why is this done? The bankruptcy court does not want to take everything you own. The goal is to give you a fresh start, getting rid of your debt so that you can move forward. It is clear in many cases that you need the tools of your trade to do so. Taking them could force you into poverty. While many people assume that they’ll lose everything and they avoid filing for bankruptcy as a result, that is not the goal.
What are your tools of the trade? It differs for everyone. If you need a tool to earn a living, it probably counts. For instance, perhaps you are a construction worker. You need your work clothes, safety gear, power tools, boots and much more. You use these items every day and would not be able to perform your job without them.
If you decide to declare bankruptcy, be sure you know what it means for you and how the process works.