Learn about tools of the trade exemptions
Your business and your individual life may be inseparable. This is often true of sole proprietors and small business owners, as well as freelancers who work in a variety of trades such as:
As a business owner in this situation, you may use property you personally own to make a living. For example, if you are a musician, your guitar may be the source of your livelihood. Likewise, your computer may be necessary to earn a living as a writer or a graphic designer. Or you may need woodworking equipment to remodel homes in your work as a building contractor. These assets are called tools of the trade and may be exempt up to a certain value under Georgia and federal bankruptcy laws.
To be considered a tool of the trade, the trustee may require you to prove that the property is not used for an activity that constitutes a hobby, but is instead necessary for wage-earning work. If you enjoy painting and hope to sell a piece one day, the trustee is unlikely to determine that your paints, brushes and easel are tools of the trade. However, the trustee is likely to concur with the exemption of art supplies if you show that the successful sale of your paintings has produced income, even if you rely on another regular wage-earning job to support yourself.
Georgia State Code allows a debtor to exempt implementations, professional books or tools of trade up to $1,500 in value. The federal exemption allows up to a value of $2,175. A bankruptcy attorney can show you how a "wild card" exemption may be used to increase the amount you are allowed to exempt and explain how the tools of the trade exemption can help you preserve your livelihood after bankruptcy.
Posted in Bankruptcy