Guns: The Most “Overlooked” or Missing Asset in Bankruptcy?

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Bankruptcy Exemptions Chapter 7 Bankruptcy

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Firearms and Chapter 7Last updated March 30, 2018.

One of the major problems that we face in assisting folks in filing bankruptcy, especially here in Kentucky, is making sure that all guns and related equipment that they own are listed as assets.

Guns and related items, including hunting equipment, are some of the most common recreational items that Kentuckians possess. The love of the sport of guns and hunting can be traced back to our frontier past and the fact that, before Kentucky was a state and even after, guns were a critical part of providing food for your family and protecting your home.

But what happens if you need to file bankruptcy? Many people worry about losing their homes, cars, bank accounts, and more. But what about firearms and Chapter 7?

Will I lose my guns in bankruptcy?

Because guns and hunting equipment are, today, such a valued possession for many folks, they are very afraid that they could face losing these items if they file for bankruptcy. Of course, most of the time, the federal “catch-all” exemption is large enough to protect even the largest collection of gun and gun accessories that the majority of folks would have.

What is the “catch-all” exemption? The federal wildcard exemption, as it’s generally referred to, can be applied to any property you own. This includes guns. Should you choose to use the federal exemptions — if you are allowed to in your state, as it may be governed by its own set of bankruptcy laws — you can exempt up to $1,250 in any property that isn’t included in your personal property list, which typically covers your car, any jewelry, household goods like furniture and clothing, tools of the trade, and health aids. Additionally, under the federal wildcard bankruptcy exemption, you can also exempt up to $11,850 of any unused portion of your homestead exemption.

In Kentucky, you can choose between the state or federal list of exemptions. The homestead exemption is much less in Kentucky ($5,000, can be doubled if married and filing jointly) than if going with the federal homestead exemption ($23,675). the personal property exemption also is less extensive under state law, depending on your financial situation and what exempt items are important to you (like $5,000 for a burial plot exemption in lieu of the homestead exemption).

Is there a specific gun bankruptcy exemption?

While about a dozen states have provisions in place to exempt firearms in bankruptcy, there is no provision in the U.S. Bankruptcy Code. Some states also only exempt firearms for personal use, while one exempts only firearms for business use. Oklahoma allows an unlimited number of exempt firearms up to $2,000 in value, while Oregon allows for one pistol and one rifle/shotgun worth $1,000 total.

According to a Congressional Research Service Report for Congress, titled “Exemptions for Firearms in Bankruptcy,” the extent of firearms protection from creditors varies greatly from state to state. Additionally:

In the 111th Congress, legislation was passed in the House (H.R. 5827) that would have provided an explicit federal exemption in bankruptcy for a debtor’s aggregate interest, up to $3,000, “in a single rifle, shotgun, or pistol, or any combination thereof.” The bill also included the means for protecting firearms by including them─subject to the same value and type restrictions─in the definition of “household goods” for which nonpossessory, nonpurchase-money security interest liens could be avoided in bankruptcy. Similar legislation was introduced in the 112th Congress: the Protecting Gun Owners in Bankruptcy Act of 2011 (H.R. 1181).

Some states’ debtors may benefit from guns being included under the “household goods” section of bankruptcy exemptions.

Do I have to disclose my firearms in Chapter 7? What about transferring my guns to another person?

The tricky part in filing bankruptcy properly is making sure that clients understand that they MUST disclose all of these items in order to exempt them. Also, it is important for clients to understand that transferring the guns to a family member or friend just prior to filing bankruptcy does not allow them to NOT list them in their bankruptcy filing.

To help educate clients, we include materials for them to fill out that include a question about guns and hunting equipment. In addition, we are careful to ask about any transfers of items that folks may have made to anyone in the past two years.

Often, educating the client about what to list is much more important than just asking them to list “all of their assets.” Much like voir dire — the preliminary examination of a witness — it can often be the most important part of a trial for trial attorneys.

Consult with an Experienced Bankruptcy Attorney

If you’re thinking of filing for bankruptcy and you’re not sure what will happen to your assets or which chapter to file under, don’t just guess and file on the internet. Bankruptcy cases filed pro se usually don’t end in a discharge of debt. In order to keep your property, including any guns or gun accessories you may own, you’ll want to consult with an experienced bankruptcy attorney near you.

National Bankruptcy Forum maintains a directory of qualified bankruptcy lawyers in the United States who are standing by and ready to help. We offer free consultations and debt evaluations, 24/7. Contact us today by filling out our online form or calling 877-280-4299.