Can You Lose Your Guns in a Bankruptcy?

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Bankruptcy exemptions and property values determine which assets you can keep in a Chapter 7 bankruptcy and how much you have to pay in a Chapter 13 bankruptcy. If you own guns, the state you live in and how much the guns are worth can play a role in whether you can keep them.

Bankruptcy Estate Assets

Any guns that you own when you file your bankruptcy case will initially become part of the bankruptcy estate, along with the rest of your property. The bankruptcy estate is comprised of all of your assets and liabilities. Estate property is no longer your property. When you file a Chapter 7 case, the bankruptcy trustee can sell estate property and use the money to repay your creditors. In a Chapter 13 case, you must pay the trustee enough to provide at least the estate's value to your creditors. However, you can protect your property and reduce the estate's value by using exemptions.

Federal or State Exemptions

Section 522 of the Bankruptcy Code, which is the federal code that governs bankruptcy, has a list of property that you can exempt from the bankruptcy estate. Most states also have laws that list property exemptions, and Section 522 grants you the right to choose whether you will use the exemptions it provides or the exemptions your state laws provide.

How Exemptions Help in Chapter 7

Your exemptions, if claimed properly, prevent the trustee from taking your exempt property and selling it in a Chapter 7 case. If you are able to exempt your firearms, the trustee cannot seize them. If you file a Chapter 7 and you are unable to exempt your firearms, you may be able to compromise with the trustee by paying him—essentially buying the firearms from the estate.

How Exemptions Help in Chapter 13

You may be able to protect non-exempt firearms by filing a Chapter 13 case. Exemptions in a Chapter 13 case only determine how much you must pay to your unsecured creditors; you are able to keep all of your property regardless of whether or not you can exempt it. You can pay the value to the estate over time and keep everything, including your guns.

Exemptions for Firearms

The Bankruptcy Code does not have a specific exemption for firearms. If you choose the federal exemptions listed in Section 522, your only option to exempt guns is to use what is known as the wild card exemption. Section 522(d)(5) states that you can exempt up to $1,150 in value of any property, plus up to $10,825 of any unused homestead exemption. Many states, however, such as Michigan and Texas, have specific exemptions for firearms.

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