What if "tools of trade" is what got me in debt in the first place?

I have over $40k in cc debt - about 75% of it came from building a project recording studio. Although I'm not registered as an official business - I only have a website - this is my career. I've been going to school for it the past few years but haven't quite gotten to the point where it is generating an income. I understand there is the cap on musical instruments at $450/per. However, all of my equipment is valued in the thousands per piece and all of it is essential in getting things done. Will they try to go after any of this or am I ok?

I have over $40k in cc debt - about 75% of it came from building a project recording studio. Although I'm not registered as an official business - I only have a website - this is my career. I've been going to school for it the past few years but haven't quite gotten to the point where it is generating an income. I understand there is the cap on musical instruments at $450/per. However, all of my equipment is valued in the thousands per piece and all of it is essential in getting things done. Will they try to go after any of this or am I ok?


In a 7, the trustee will likely be very interested in it. As you probably know, exemptions are limited (the extent of which depends on the state in which you reside). Assuming the exemptions are over the limit, and the items can be liquidated to generate some money for creditors, you may have a problem. A 13 may be different. As usual, a specific answer would depend on many more facts but a lawyer should be able to quickly tell you the options.

If you are in a state that allows you to claim Federal exemptions and you don't use up the homestead exemption, then you have a wildcard exemption of up to $10,000 to protect any asset.

Do you know if the debt is secured or unsecured?

If it's secured, you'll have to figure your equity in the property. If you have little or no equity in the property, you usually get to keep it if you redeem, reaffirm, or do a 13 "cram down" on the debt.

If it's unsecured, you own the property free and clear. However, in bankruptcy, the value of the property that exceeds your exemptions is liable for your debt. In a chapter 7, the trustee will want to sell the property for the benefit of creditors. If you file Chapter 13, you get to keep the property as long as you can pay at least the value of your nonexempt property in plan payments.

If it's secured, you'll have to figure your equity in the property. If you have little or no equity in the property, you usually get to keep it if you redeem, reaffirm, or do a 13 "cram down" on the debt.

fyi...as of October 18, 2005, the Ch 13 "cram down" on secured debt no longer exists. Another "improvement" in the bankruptcy law voted in by Congress to stop fraudulent filers (which total about 2% of all bankruptcy filers). And this change just happened to put millions of dollars back into the pockets of the major auto lenders who donated millions to senatorial and representative political campaigns....hmmmm......could there be a connection???? :dry:

You need to try to keep everything if possible. A set of turntables that cost a couple grand new are only worth 200-300 as a wholesale value. Maybe have someone from a pawn shop give you an offer on everything and claim that as the values. All that stuff you paid top dollar for is really not worth all that much when it comes to resale, unless you're selling to the right people, which the trustee won't be doing if its auctioned off.