“Tool of the Trade” Exemption Not Available to Foster Parent

Case: In re Sedillo, Case No. 11-31982 MER (Bankr.D.Colo. 2012).

Discussion:  Debtor claimed a tool of the trade exemption for a 2003 Nissan Murano she used to transport foster children for their everyday activities.  On the Petition Date, in addition to one biological child and two adopted children, Debtor was also caring for two foster children and receiving approximately $3,434 per month in reimbursement to defray the costs associated with caring for the foster children.  Debtor also generated approximately $1,782.54 in gross income per month as a cosmetologist.

At trial, Debtor admitted that she does not participate in the foster child program for profit; rather, she is involved in the foster child program to provide foster children with love, guidance and a stable home.  To claim the tools of the trade exemption, the Debtor attempted to broaden the definition of “gainful occupation” so that use of her car in connection with foster care would fall within the exemption’s scope.

Debtor argued that occupations falling under the exemption statute do not need to be profitable.  Specifically, Debtor argued that “gainful” should be interpreted broadly and not limited to occupations that generate profit, reportable income or create a taxable event.  The Trustee argued that Debtor does not earn a profit as a foster parent, which is critical to having a “gainful occupation.”  Also, by analogy, a parent receiving child support may not claim parenting as their occupation.  The Trustee also argued that the Debtor is entitled to the motor vehicle exemption and should not be able to claim an exemption no other parent can claim.

The court held that Debtor was not entitled to a tool of the trade exemption because the foster care payments were reimbursements, not profits.  To arrive at this conclusion, the court looked at the definition of “gainful occupation,” the nature of foster care and parenting, and the practical consequences of expanding the exemption to include foster care payments.  Relying on numerous dictionaries, the court determined that “the plain meaning of the word ‘gainful’ is profitable (or at least capable of being profitable), and the plain meaning of the word ‘occupation’ is principal work or business.”  In re Sedillo, Case No. 11-31982 MER, p. 7 (Bankr. Colo. 2012).  Applying those definitions, the Court reasoned that foster care payments are reimbursements to defray the costs of care, then such payments are not profit, and that “transporting children is not part of a business, but part of managing a household.”  Id. at 8.  In other words, being a foster parent carries with it the same responsibilities as being a parent to biological or adopted children; thus, the foster parent distinction is not applicable.

Finally, the court addressed the practical implications of broadening the exemption.  Particularly, the court was concerned that Debtor’s interpretation of the statute would lead to “endless claims of exemption for anything and everything a parent uses in connection with raising their children.”  Id.  Furthermore, this result would undermine the purpose of the exemption, which is to protect tools of the trade from creditors.

Key Quotations:  “The Debtor’s position renders foster parenting analogous to employment as a primary caretaker of a child.  It is not the same circumstance, and the Court declines to expand ‘gainful occupation’ in such a manner.”  Id. at 9.

“[T]he Court determines the phrase ‘gainful occupation’ means the principal work or business for which a person receives compensation or profit, not reimbursement.”  Id.

– Aaron Conrardy