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Wednesday, May 4, 2011

Exemptions for Firearms in Bankruptcy

Carol A. Pettit
Legislative Attorney

Vastine D. Platte
Information Research Specialist

The U.S. Supreme Court’s decisions regarding the nature of the people’s right to “keep and bear arms,” as guaranteed in the Second Amendment to the U.S. Constitution, has focused some interest on the extent to which firearms are protected from the reach of creditors under either federal or state laws. State laws protecting certain property from creditors’ claims may be used both in and outside of the bankruptcy context. Federal law may also protect certain property from creditors’ claims in bankruptcy.

Although a number of states have provisions explicitly shielding firearms from the claims of creditors, there is currently no such provision in the U.S. Bankruptcy Code (title 11). In the 111
th 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 themsubject to the same value and type restrictionsin the definition of “household goods” for which nonpossessory, nonpurchase-money security interest liens could be avoided in bankruptcy. Similar legislation has been introduced in the 112th Congress: the Protecting Gun Owners in Bankruptcy Act of 2011 (H.R. 1181).

The Bankruptcy Code generally provides two options for claiming exemptions in bankruptcy
either the exemptions provided in 11 U.S.C. § 522(d) or the exemptions available under state law. However, debtors may only choose to use the federal exemptions in § 522(d) if their state specifically authorizes them to do so. Because the proposed federal exemption for firearms would be included in § 522(d), debtors whose states do not authorize them to use the § 522(d) exemptions would not benefit from the proposed change in exemptions. They might, however, benefit from the inclusion of firearms in the definition of household goods, because they could then have the option of freeing those firearms from liens that were based on a nonpossessory, nonpurchase-money security interest.

There is great variety in the extent of the protection from creditors the states provide for firearms. The majority of states provide no explicit protection. Among those that provide protection (17 states plus Puerto Rico and the District of Columbia), the conditions for providing that protection vary. Some states limit the exemption by both the number and value of the firearms; some do not limit the number but may limit either the value of each firearm or the aggregate value of all. Other states specify the type of firearms that can be exempted. In most states that allow an exemption for firearms, the exemption is not dependent upon the way in which the firearm is used. Several states, however, exempt only guns that are for personal use, and one state requires that the firearm be used for business purposes.

Date of Report: May 2, 2011
Number of Pages: 9
Order Number: R41799
Price: $19.95

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