Colorado Springs Bankruptcy ABC’s: “T” is for “Tools of the Trade”

Today I’ll be writing about “Tools of the Trade” and how, under Colorado law, you get to keep them, even if you file for bankruptcy.

As a Colorado Springs Bankruptcy Lawyer, I often meet with people who are worried if they file for bankruptcy, they’ll lose their car, their house or other things that they own.  I explain to them that under the Bankruptcy Code, they are allowed to keep certain things, up to a certain value, in order to help them get a fresh start on their financial lives.

One category of things that are “exempt” from being taken when you file for bankruptcy are your “Tools of the Trade”.  So, what exactly are “Tools of the Trade”?

Some of them are easy to understand:

  • Tools used in your work, like mechanics’ tools, carpenters’ tools, etc.
  • Musical instruments used by musicians.
  • Scissors and clippers used by hair stylists.

But some are not so easy to distinguish:

  • A real estate agent’s car?
  • The construction worker’s truck?

In Colorado, both of those categories may be considered tools of the trade, and therefore, exempt up to $40,000 in value for a couple filing a joint bankruptcy case.  This was the ruling in the case of In re Sackett, 394 B.R. 544, decided in August 2008.  In the Sackett case. Judge Brooks held that the Debtor, Julie Sackett, a Registered Nurse, was required to use her vehicle to perform home visits.  The Court went further and established questions to be asked in trying to determine when a motor vehicle may be considered exempt as a “tool of the trade”:

  1. Is the vehicle “kept for the purpose of carrying on any gainful occupation?”
  2. Is there a suitable alternative available to the debtor for the purpose of carrying on the debtor’s gainful occupation?
  3. Is there evidence of “actual use” of the vehicle by a debtor for his or her gainful occupation?
  4. What is the debtor’s prior employment history, present employment situation, and future prospects of employment?
  5. Is a “fresh start” attainable without the motor vehicle?

Based upon the answers to the above questions, your vehicle may be exempt from being taken by the Trustee.

If you have a question about the tools of the trade exemption, or any other bankruptcy question, don’t hesitate to give me a call at 719 227-8787.

Other non-Colorado Springs Bankruptcy Attorneys have also written about Bankruptcy “T” words:  Bankruptcy ABCs.

photo credit: TooFarNorth


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