Ontario Bankruptcy Exemptions: Tools Of The Trade

| Category: What You Keep or Lose
Category: What You Keep or Lose | (2) comments

tools of the trade bankruptcy exemptionBankruptcy can be the beginning of a fresh start and an opportunity to rebuild. If you are in a trade or profession that requires you to provide your own tools or equipment you may wonder how these assets are affected in a bankruptcy.

In general, bankruptcy law tries to balance the rights and needs of the bankrupt with the rights and needs of creditors. Included in this process are guidelines regarding assets of a bankrupt person so that they can be fairly distributed to the people that you owe.  It’s the trustee’s job to “realize on the assets” or more simply, take possession and sell them to deliver the proceeds to your creditors.

A self-employed person, or individual engaged in a trade, may have specific property that they use to earn their living. The tools of your trade are probably the most important assets that you have. If you lose them, it means that you can’t carry on in your trade and can’t earn a living.

Within bankruptcy law, there are provisions to enable a person who has filed bankruptcy to keep a certain value of property in their possession, despite the fact that they are filing bankruptcy.

Included in these exemptions is property often referred to as “tools of the trade”. Such property could include:

  • hand or power tools for a contractor,
  • computers and software for an IT consultant;
  • tools used by a mechanic;
  • any property used specifically in the conduct of the business or to earn your income can fall under the exemption.

Tools of the trade are exempt up to $11,300 in current value. The concept of current value is important, as the replacement cost of articles is obviously much higher than their current value. Current value simply means the amount that would likely be received if the items were offered for sale in the open market, such as an auction. To purchase new a van full of tools, could be tens of thousands of dollars, but sold used at auction, it would be a fraction of that value. For practically everyone that I have ever helped, the exemption amount was sufficient to ensure that they retained all the tools critical to their profession so that they could continue to earn a living.

Once people learn about the property exemption limits permitted in a bankruptcy, their worries about the process go away. Certainly no one wants to go bankrupt, but if you know that you can deal with your debt, get a fresh start, and keep what you need to earn a living, it’s a lot easier to make the decision to proceed.

If you are dealing with too much debt you owe it to yourself to get informed. Make the call to a local Trustee in Bankruptcy to book your free, no obligation consultation and get the information you need to find the right debt solution for you.

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  1. Jim Turnbull

    If three people (two parents) and myself are on the mortgage and I want to declare personal bankruptcy do we lose the house in the process or can we still keep the house?

    Thanks in advance for your reply.

    1. Ted Michalos, Bankruptcy Trustee

      The issue isn’t whether or not you are joint on the mortgage – the question is whether or not your name is on the title for the house. If you “own” an equal share with your parents then you are entitled to 1/3 of the equity in the house. If you file for bankruptcy you’ll be required to pay an amount equal to your share of the equity. Make sure you discuss this with your trustee BEFORE you file – it is important to have a plan in place to deal with the house so there are no surprises during your bankruptcy. Surprises are almost always bad…


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