November 21, 2017

Bankruptcy Exemptions: Tools of the Trade

When filing for bankruptcy, a consumer is afforded numerous exemptions, or laws that protect a person’s property. These exemptions help to protect a homestead, livestock, household goods and furnishings, vehicles, and other property.  There is an exemption that protects tools of the trade as well.  This post will detail the tools of the trade exemption, and what constitutes “tools of the trade.”

Broadly speaking, tools of the trade relate to books, implements, and tools related to a person’s trade or vocation.  For example, a mechanic has power tools, air compressors, and the like; a woodworker, may have a lathe, router, electric saws, books on woodworking techniques, and so on.  All of these “tools of the trade” are covered by the tools of the trade exemption.  Other tools of the trade, depending on a person’s vocation or trade, may include: equipment, machinery and tools, books and trade libraries, specialized furniture, vehicles, animals, and so on.

Depending on which exemption scheme you may choose, a person filing bankruptcy in Oregon may choose the Oregon Tools of the Trade Exemption or the Federal Tools of the Trade Exemption.

1. Oregon Tools of the Trade Exemption – ORS 18.345:   The Oregon Tools of the Trade Exemption is defined as “The tools, implements, apparatus, team, harness or library, necessary to enable the judgment debtor to carry on the trade, occupation or profession by which the judgment debtor habitually earns a living, to the value of $5,000.”  The Oregon Tools of the Trade Exemption is a bit more than the Federal Tools of the Trade Exemption; however, usually applying the Federal exemption has more beneficial results as a person also has a wild card exemption that can also be applied to tools of the trade.

2.  Federal Tools of the Trade Exemption – 11 USC 522:  The Federal Tools of the Trade Exemption applies to a debtor’s aggregate interest, not to exceed $2,300 in value, in any implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor.

The Federal Wild Card exemptions can also be used in conjunction with the Federal Tools of the Trade Exemption, which, when used together, can protect over $14,000 in tools of the trade.  In most instances, it makes better sense to use Federal Exemptions, despite the fact that the tools of the trade exemption is less in the Federal exemption scheme than it is in the Oregon exemption scheme because of the wildcard exemption.

If you would like to learn more about bankruptcy and how bankrutpcy may benefit your financial situation, please contact me today for your free bankrutpcy consultation.

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