There are numerous bankruptcy exemptions in Michigan, and one is for the tools of the trade. This allows someone to keep tools, implements, materials, and other necessary items for them to carry on with their profession or occupation.
The law does state that this exemption applies to a primary occupation, not just a side business. But it can offer substantial protection for those who need to keep expensive tools and equipment through bankruptcy. Examples could include computers, power tools, personal protective equipment and much more, depending on their specific occupation.
Why is this exemption allowed?
In understanding this exemption, the key is to remember that bankruptcy is supposed to be a positive process that provides a fresh start for the filer. It helps them eliminate overwhelming debt, with the hope that they can create a positive financial future.
If a person files for bankruptcy and clears their debt, but also loses all of the tools of their trade, they may not realistically be able to earn a living moving forward. That does not give them the positive financial future that they are looking for, and it would more than likely mean that they find themselves back in debt relatively quickly.
But by allowing them to keep these necessary items, they can continue in their profession and focus on budgeting around their income to avoid future financial difficulties.
Understanding your exemption options
The tools of the trade is just one exemption of many in Michigan. People often do not lose nearly as many assets as they believe, even during a Chapter 7 liquidation bankruptcy. Be sure you know exactly what legal steps to take.
