House Passes New Exemption For Gunowners Facing Bankruptcy! Well, Whoop-Ti-Do!

29 Jul House Passes New Exemption For Gunowners Facing Bankruptcy! Well, Whoop-Ti-Do!

The United States House of Representatives passed H.R. 5827 which allows gunowners to exempt up to $3,000.00 in value in firearms. A comparable version is pending in the Senate now. This is big news right? Not really.

First, putting aside the fact that the Senate must pass this legislation and the president must sign it, so what does H.R. 5827 do for actual people. For people in approximately 33 states of the country–it does nothing. That is right–nothing!

Under 11 U.S.C.§ 522(d), certain property may be exempt from the bankruptcy estate. H.R. 5827 proposes to add an extra paragraph to allow “[t]he debtor’s aggregate interest, not to exceed $3,000 in value, in a single rifle, shotgun, or pistol, or any combination thereof.” Apparently, the House agrees with the National Rifle Association that Americans should retain the right to defend themselves with firearms even though they face financial difficulties. While I do not take issue with this proposition, perhaps the NRA should hold onto their lobbying money.

Most states are allowed to “opt out” of the federal exemption scheme in bankruptcy. My state is an “opt out” state. Approximately thirty-two other states are “opt out” states. Of the remainingstates (approximately seventeen), some states allow the debtor to choose between the federal and state exemptions. Obviously, most debtors will choose the more favorable exemptions in those states. Additionally, if a debtor has not lived in his current state for more than 730 days, then we look back to his prior state to determine if that state’s exemptions apply. Most states do not allow for “extra-territorial” application of exemptions, so in the situation where the debtor recently moved to an “opt-out” state, perhaps the federal exemptions will apply.

So what does all this mean? Basically, the House is passing a meaningless law–well, perhaps meaningless for residents of 33 states. Those 33 states would also have to amend their exemption schemes in order to make this new exemption effective across the country. Incidentally, of the sponsors of H.R. 5827, none of their respective states utilize the federal exemptions in bankruptcy.

Basically, the sponsors get to cash the NRA’s check but the legislation really doesn’t mean anything. Call me cynical.

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Adrian Lapas, Esq.

I've been practicing bankruptcy law in North Carolina since 1993, and am certified as a specialist in consumer bankruptcy law by the North Carolina State Bar.
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