When planning for a bankruptcy filing – and particularly for a Chapter 7 filing which leads to liquidation of assets – it is natural to start looking at your belongings with a fresh eye, anticipating (and dreading) having to sell off the things that you love. The things that you have purchased and accumulated over the years each have different meanings to you, but all represent an expense that you considered worthwhile. The idea of having them sold to satisfy debts can be heartbreaking, especially when it comes to musical instruments which may represent either a source of income or a source of personal joy. Fortunately, the federal bankruptcy laws offer exemptions that cover both possibilities. It is important to distinguish between federal bankruptcy laws and state laws because they differ significantly, and in the state of Pennsylvania you must choose whether to use state exemptions or federal exemptions.

For performers who earn income from playing their musical instrument, the federal government provides a ‘tool of the trade’ exemption which allows a debtor to keep an item of value that is essential to their ability to earn a living, up to a value of $2,525. In order to avoid selling the musical instruments under this exemption, you must indicate on your bankruptcy filing that you are a professional musician. You are able to do this even if you only earn income from playing music on a part-time basis, or even if you are not currently employed or working as a musician but can show that you have in the past. Notably, the state of Pennsylvania does not offer a ‘tools of the trade’ exemption at all.

For those who own musical instruments that are not used for income but rather for their own enjoyment, there is another exemption available from the state of Pennsylvania. The state offers a $300 wildcard exemption which can be applied to any personal property up to the $300 limit. This means that a musical instrument valued at more than $300 is eligible for asset sale. By contrast, the federal government allows musical instruments valued at up to $625 to be exempted from an asset sale.

It seems clear that if you are filing for bankruptcy in the state of Pennsylvania and you want to hold onto your musical instruments, choosing the federal exemptions may make sense, but there are many other factors that need to be considered. For guidance on the best path for your situation, contact our experienced bankruptcy attorneys today to set up a time for a consultation.