It would be a terrible thing if you are trying to make a living by using your hands, got into financial trouble financially, had to file for bankruptcy protection, and then found out you could not keep your tools for work. In some rare cases, it happens. So, can you keep your own tools for your job after filing bankruptcy?
Depending on which type of bankruptcy you file, the answer to the question could be yes, no, and maybe part of your tools.
There are basically two types of bankruptcies most individuals can file- a Chapter 7 or a Chapter 13.
A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. After filing a Chapter 7, a bankruptcy court trustee will gather all your non-exempt assets and turn your non-liquid assets into cash, combine the new cash with your non-exempt liquid assets and pay off your unsecured debts by a prioritized list until the money is gone or your debts are paid in full.
Whatever money you have left after paying off your unsecured debts and court costs in a Chapter 7 case is yours to keep, if any. If you fall short of paying all your unsecured creditors, all the rest of the non-exempt debt will be discharged, and you will never be responsible for paying those particular debts again.
Exemptions are very important in a Chapter 7 case. There are two types of asset exemptions- federal or state.
Asset exemptions are allowed by bankruptcy courts in a Chapter 7 case to protect those particular assets from being liquidated to pay off debt. In affect, you can keep any exempt asset protected by law, and the bankruptcy court trustee will liquidate any non-exempt asset.
Although bankruptcy laws are federal as laid out by the Constitution of the United States, the states are allowed to supplement federal laws to accommodate their citizens. Asset exemption status is one area states are allowed to make state bankruptcy laws to fit the needs of their citizens. Some states will allow you to choose between federal or state exemptions when you file in a federal court of jurisdiction within that state. Other states will not let you choose.
Tools of your trade are traditionally listed by both federal and state exemptions. Depending on which state you live and their bankruptcy laws, you may be able to keep all the tools of your trade, none of them, or a portion of them.
Knowing what you can and cannot claim as an exemption is one reason you might want to enlist the help of a bankruptcy lawyer who could help you understand how bankruptcy laws may apply in your particular situation.
A Chapter 13 bankruptcy, commonly called a wage earner’s plan, enables individuals with regular income to develop a plan to repay all or part of their debts over three or five years. In this type of bankruptcy, you can keep all your assets, including tools of your trade, as long as you make your payment plan in a timely fashion.
Latest posts by admin (see all)
- Free Information Resources for Filing Bankruptcy - August 15, 2013
- When Creditors Change the Rules in Mid Stream - August 13, 2013
- Understanding the Concept of a Claim in Bankruptcy - August 8, 2013