Tools of Trade
Definition - What does Tools of Trade mean?
Tools of trade are the equipment, paraphernalia and other items that a person requires to work in their profession.
Tools of trade become important when bankruptcy is declared, because they are exempt property that creditors cannot seize. Tools of trade are protected from creditors so that a person experiencing financial difficulty is empowered to continue working.
Justipedia explains Tools of Trade
In each jurisdiction, the applicable exemptions for property that creditors cannot claim at bankruptcy are found in state statutes. The development of tools of trade protections is based on the idea that if a person filing for bankruptcy is deprived of the means that they have for gaining employment, it will be very difficult for them to ever regain financial stability.
In bankruptcy cases, litigation to determine what a person's tools of trade are often occurs. A carpenter, for example, can claim exemptions for their hammers, screwdrivers, saws and tape measures, but probably not their laptop. A computer programmer, on the other hand, can claim their laptop, but not their household hand tools.