Digital Files as Tools of the Trade

Every state as well as federal law allows an exemption for tools of the trade.  By exemption, of course, we mean assets that cannot be taken by the bankruptcy trustee.  “Tools of the Trade” is a term used to define the exemption of tools, implements, equipment, and means of production regularly and reasonably necessary to carry on a person’s business.  Such a wide definition gives great latitude to the person filing bankruptcy.  In past years tools of the trade disputes coming before the bankruptcy court usually involving hard items such as hand tools or saws, plows, rakes and even livestock.  But in more recent days people are making all or part of their business through the use of digital and media devices.  A recent decision from the United States District Court for the District of Kansas affirmed a Bankruptcy Court decision that digital photographs and a website can be claimed as tools of the trade.  Of course the person in bankruptcy must prove that they are using the digital media as a means of production to seek a livelihood.  Social media accounts such as Facebook or Twitter may also be ruled as tools of the trade under this precedent.  It is indeed a new world.   In re: MacMillan (D.Kan. Dec. 11, 2015).