Virginia Code §34-26, the "Poor Debtor's
Exemption" section, allows a debtor to claim tools used in the course of
his trade or occupation and keep them from creditors in bankruptcy cases. This exemption also applies to collection
cases, as the debtor may use this exemption to prohibit post judgment
collection by execution on the asset.
In the
case of Monticello Arcade L. P. v. Lyall, the United States Bankruptcy Court
at Newport News reviewed §34-26 in regard to an architect's Acura
automobile. The Bankruptcy Court denied
the exemption based upon the classification of the car as a "luxury"
car. The Appeals Court reversed and remanded
the case with instructions that the Bankruptcy Court focus not upon whether the
car is a "luxury" car, but upon whether the car is an "absolute
requirement for [debtor] to efficiently and competently perform his work as an
architect." Upon the Bankruptcy
Court’s review, the Court ruled that the architect had demonstrated with his
daily calendar and his testimony that the car was used to visit clients, job sites
and government offices. The debtor was a self-employed architect in Hampton
Roads, had practiced architecture on his own for six years as owner an president
of his company. The debtor testified
that although he used the vehicle to commute to and from work, the vast majority
of the time he used the vehicle for non-commuting business purposes. The debtor also testified that he had to
visit job sites in order to interpret plans and in order to understand the
scope of the project. The Court noted
that there was no evidence that there were alternate means of transportation
available for the debtor to accomplish these requirements. Accordingly, the Court, this time around,
found that the vehicle was "necessary", and therefor was exempt under
Virginia Code §34-26(7).
In the
case of White v. Central Fidelity Bank the United States Bankruptcy Court
at Roanoke, Virginia, reviewed the language of Virginia Code §34-26 and held
that the plain meaning is that property which is "necessary for use in the
course of the householder's occupation or trade" qualifies as a
"tool" for purposes of exemption.
In White the Court noted that in regard to automobiles, the particular
facts surrounding the occupation and the necessity of the automobile must be
examined. In White, the debtor
had both a day and an evening job as a nursing assistant providing home health
care in patients' homes, and whose employment contract required that she have
an auto as a condition of her employment.
Based upon these facts, proof that the creditor's lien was a nonpossessory,
non-purchase money lien, and the fact that the creditor's lien impaired the
debtor's exemption, the Court held that the lien was avoidable under Bankruptcy
Code §522(f).
In the
civil/collection case of Hunn v. Zettel the Fairfax County Circuit Court
had occasion to review a debtor's claim for an exemption for his BMW car as a
"tool of the trade". Unlike
the evidence obtained in Lyall which demonstrated the "absolute
requirement", in Zettel, no such evidence was presented. Accordingly, the Court denied the debtor's exemption
claim in Zettel.
Looking
at another case involving tools of the trade, the United States Bankruptcy
Court at Newport News, in the case of In re Aldrich, upheld the debtors'
motion to exempt various items of property, including an inoperable photo
enlarger and two photo processors, as "tools of the trade" under Virginia
Code §34-26. The Court concluded that
these items were exempt under Virginia Code §34-26 and under Bankruptcy Code
§522. The Court in Aldrich stated
that it reached its conclusion from the plain meaning of Virginia Code §34-26,
and from the obvious intention of the Virginia legislature, which substantially
broadened the scope of the relevant
definitions when it amended Virginia Code §34-26 in 1990. The Court in Aldrich found from the
unrebutted testimony that the photo processing equipment was necessary for use
in the debtors' occupation involving the family photo processing lab. There was no doubt that the debtors had been
in the photo processing business for some time and, in the case of the husband,
almost continuously since his retirement from the Air Force. It was likewise absolutely clear from the
evidence that the wife was engaged in the photo processing business of a third
party at the time of the filing of the petition, and that she too awaited the
startup of the family business in order to utilize the exempted tools of the
trade, which she was currently utilizing on a part-time basis. Therefore the Court found that both debtors
were, or intended to be engaged, in an occupation and trade at the time of the
filing of the petition. The Court found
it to be sufficient that the husband had the intention of returning to his
occupation as a photo processor at the time of the bankruptcy filing, even though
he had been precluded from doing so by the contractual relationship with the
objecting creditor, who bought out the debtor's earlier photo processing
business and implemented a non compete agreement.
