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NC Bankruptcy: Can the Self-Employed Keep Business Tools After Filing?


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For anyone who is self-employed in North Carolina, unless you have all the necessary tools and equipment for your business, there is no way for you to earn a living. For example, let’s say you own a landscaping business. Without your lawnmowers or weed eaters…you don’t have the proper equipment to run your business. So, if you file for bankruptcy in North Carolina, will you lose your tools of the trade?

One of the most common bankruptcy fears among North Carolina’s self-employed is losing business equipment. Let’s face it, it’s your livelihood we’re talking about here. If you were to lose your tools, you’d lose your business and that would make it extremely difficult to find bankruptcy a viable option. After all, you’re already in financial distress if you are self-employed and considering bankruptcy as an option. You couldn’t possibly justify filing if you lose your business in the process, right? Fortunately, under North Carolina bankruptcy law, there is an exemption for tools of the trade. In most cases, the exemption will allow you to keep tools, equipment and other necessary work items.

North Carolina Bankruptcy Exemptions

North Carolina’s exemption laws are meant to protect the notion that people should be entitled to keep a certain amount of their own property in order to maintain a standard of living. They are also meant to protect your ability to keep working and earn a decent living. The NC tools of the trade policy is a perfect example of why bankruptcy exemption laws were created. By allowing debtors to keep tools of the trade during the bankruptcy process, self-employed citizens can continue to work and support their families. Bankruptcy was not designed to punish you by taking away your ability to own and run a business; it was designed to help you get out of debt and start with a fresh financial start.

Specifically, under North Carolina bankruptcy law, the trade tools exemption states: "The debtor's aggregate interest, not to exceed two thousand dollars ($2,000) in value, in any implements, professional books, or tools of the trade of the debtor or the trade of a dependent of the debtor." Let’s take a look at what that exemption actually means and how it applies to the tools you need for your business.

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Dollar Limit of Exemption

As the rule states, there is a $2,000 limit on the equipment that you are allowed to call exempt. This may concern you if you are self-employed in a business that uses expensive assets, such as heavy machinery, but you may be able to utilize other exemptions to help you. That’s why it is essential to consult with an experienced North Carolina bankruptcy attorney when you are self-employed and considering bankruptcy as an option.

Business Organization

North Carolina’s tools of the trade exemption is an individual exemption. It applies only to property and assets that are owned by you. If your assets are owned by an entity, such as an LLC, they cannot be directly exempt. However, if your tools are owned by a business or LLC, that doesn’t mean it’s all over for you. There are some very specific bankruptcy issues that could work to help you keep your tools and it is especially important your NC bankruptcy attorney does a careful case evaluation.

Type of Tools

Trade tools are different for everyone. Trade tools can be compared to the “eye of the beholder” in this case. For example, if you run a dog grooming business, your shampoos and dog leashes would be considered as trade tools. For the average dog owner in North Carolina, these “tools” would be simple household goods. In the eyes of the court, your specific trade tools are considered exempt.

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While this is just a short explanation of the state’s tools of the trade exemption statute, if you’re self-employed and considering bankruptcy, you’ll definitely need the expertise of a trusted North Carolina bankruptcy attorney. Keeping your equipment is only one of the considerations when you’re thinking of filing either a Chapter 7 or Chapter 13 bankruptcy in North Carolina. 

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