Will Chapter 7 cost you the tools of your trade?

Will Chapter 7 cost you the tools of your trade?

On Behalf of | May 19, 2022 | bankruptcy |

You’re considering bankruptcy because the debt feels insurmountable, but that doesn’t mean you’re not working. You still have a certain trade that you’ve dedicated your life to. Maybe it’s going through a hard patch. Maybe you suffered from an injury or an illness. But you do hope to continue your career in this trade.

What you’re worried about is that declaring Chapter 7 bankruptcy means you have to liquidate your assets. You hope that you can get rid of your debt so that you can become profitable again, and then you can start growing your business. But if you lose all of the tools, machines, equipment and other types of items you need for your chosen trade, how is that possible?

For instance, perhaps you are a carpenter. You need to have table saws, power drills, miter saws, belt sanders and many other such items. These are all worth thousands of dollars. If you’re forced to sell them, even if your debt is completely eliminated in the process, there’s no way that you can just get back to work after the fact. This would completely eliminate your career.

These items are likely exempt

There is good news. Under Chapter 7, you have a number of exemptions. You do sometimes have to liquidate your assets, but you only have to liquidate the non-exempt assets. The tools of your trade are often exempt. A carpenter would get to keep the tools noted above, for example, or a music producer would get to keep their instruments and their computer. Every profession is different, and there are some limits to the value of the items that can be exempt, but you’re not going to lose everything that you need to be productive after the bankruptcy filing. In Illinois you can exempt $1,500.00 in tools of the trade. If your tools are worth far more than that then Chapter 13 is an alternative. The creditor still has to leave you alone and you would lose nothing.

Working through the process

It’s important that you understand exactly what steps to take when declaring bankruptcy. Knowing what exemptions are possible is just one part of this. Be sure to carefully consider your options.