There was an interesting Chapter 7 Bankruptcy case Weimann, Vincent O. and Brenda K.; In re, (Bankr. N.D. Ill. 2009) involving a debtor who was able to exempt property as tools-of-the-trade despite a temporary interruption in his business.
The details of the case:
The Chapter 7 debtor-husband owned a boat rental business. He operated the business in 2006 and 2007, losing money both years. He didn’t operate the business in 2008 due to financial difficulties, but planned to resume operations in 2009. Each of the debtors claimed the full $1,500 tools-of-the-trade exemption allowed under state law to protect a trailer, boats, life jackets and oars. The trustee objected that these items were capital assets that the debtors were not currently using.
The bankruptcy trustee’s objection was overruled and the husband-debtor was allowed to claim the bankruptcy exemption. The bankruptcy court stated that because the items were actually used in the business and were of modest value the exemption should be allowed. The bankruptcy court also stated that the fact that the debtor did not operate the business during 2008 would not affect the availability of the exemption.
For debtors considering bankruptcy who want to claim the tools-of-the-trade exemption speak with a bankruptcy attorney about the value of the items and what may or may not be exempt from seizure. If you are operating a business and have essential tools that you want to protect from seizure during bankruptcy, make sure that you keep good records about the value of the items and the essential nature of the items to your business.