Can I make my Car Business "Tool of Trade"?

[MarieT]

Okay....after all this time of struggling to make it work to try to settle with all the creditors, we have finally made the decision to file Ch 13.

My biggest issue right now is that I have a paid off car that seems to have a value of $11,000 and my husband has equity of about $4,000 in his car and we can only exempt $10,000 total. I know we can exempt $20,000 for "Tools of Trade" for our business. Since I use my car primarily for business, can I put it under that?

[despritfreya]

You can claim whatever exemption you wish. The Trustee and/or creditors have 30 days from your 341 meeting to object. If they do, you will have to prove that you are entitled to the exemption.

Colorado Revised Statute § 13-54-102(1)(I) states as an allowed exemption:

(i) The stock in trade, supplies, fixtures, maps, machines, tools, electronics, equipment, books, and business materials of any debtor used and kept for the purpose of carrying on any gainful occupation in the aggregate value of twenty thousand dollars; except that exempt property described in this paragraph (i) may not also be claimed as exempt pursuant to paragraph (j) of this subsection (1);

Taking it a step further, Section (j) is the vehicle exemption and it states:

(j) (I) One or more motor vehicles or bicycles kept and used by any debtor in the aggregate value of five thousand dollars.

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So, without knowing the finer details of Colorado exemption law, it appears that so long as you do not declare an exemption under (j) for the vehicle you may be able to use the tool of trade exemption. Now, someone else will have to indicate whether or not you would be limited to $5k for the vehicle or if you can exempt up to $20k as a “tool of trade”.

The best thing for you to do is to seek the advice of an attorney in your local area.

Des.

[Peeps]

The Colorado BK trustee that I saw in action a week ago definitely paid close attention to a filer's attempt to classify his truck as a tool of the trade. She allowed him the full $20k exemption for it. But then she took a very close look at his business as a whole. In his case, the business really didn't seem to have much income and might not have truly been active. Your trustee might not just have questions about the vehicle... he/she might have questions about your business as well. Best of luck.

[justbroke]

I'm with the little yellow chickens on this (Peeps). It will be in total context of just what your business is and to what extent that the property is actually a tool of the trade. Generally, this is readily apparent to the Trustee, by simply reviewing your tax returns!!!

[MarieT]

We claim my car to the full extent that we can on taxes every year...just my car, not my husbands. I am a realtor so I rack up a lot of miles using it for business. My business is not making a lot of money but I can show that I'm actively trying to make money. My attorney told me that it was okay and classified my car as business tool and we still weren't anywhere close to the allowance.

[HHM]

You should be fine, CO has a "relatively" liberal view on Tool of the Trade (it will come down to which trustee and which judge you get). Just hope you have an attorney that has ability to fight the issue. Unfortunately, with the huge influx of new, inexperienced attorneys in BK (some of the top results of a google search for "colorado bankruptcy attorney" have filed less than 10 cases), it is so easy for the unwary consumer to sucked into the low fee.

[MarieT]

I have a really good experienced attorney so I am good there. Kind of worried about the trustee and judge combo....don"t they all go by the same rules? I think my attorney told me there was something like 50,000 Ch 13's filed in Colorado (last year?) and only 3 trustees so can that possibly be right? If that's even true, how could they even attempt to audit all the cases? That would be almost 3,000 cases per week per trustee...I must have misunderstood!

[HHM]

Well, not even close, there are a TOTAL of about 25,000 BK's in CO statewide, and the chapter 13 attorneys in Colorado are "notorious" for frivolous objections. Some judges are getting more proactive about raining in the chapter 13 trustees, other let them ride bare back through the BK code. However, generally, a vehicle for a real estate agent is not going to be a problem.

[newbie2]

Okay....after all this time of struggling to make it work to try to settle with all the creditors, we have finally made the decision to file Ch 13.

My biggest issue right now is that I have a paid off car that seems to have a value of $11,000 and my husband has equity of about $4,000 in his car and we can only exempt $10,000 total. I know we can exempt $20,000 for "Tools of Trade" for our business. Since I use my car primarily for business, can I put it under that?

If you are paying at least $5000 to your unsecureds in your plan then you have nothing to worry about. Remember, you CAN have more non-exempt items in a Chapter 13 plan without fear of losing them.

[Billssuck]

I included one of my vehicles as a "tool of trade" when filing my ch13. It got approved without any problem but it was very apparent that it was used in my line of work.