Let's Talk About Guns: Should the Code Give Gun Owners Protection?

• Citation: Vol. 32 No. 1
• Publication year: 2015

Let's Talk About Guns: Should the Code Give Gun Owners Protection?

Armstead Lewis

LET'S TALK ABOUT GUNS: SHOULD THE CODE GIVE GUN OWNERS PROTECTION?

Abstract

In 1978, Congress added the term "household goods" to § 522(f)(1)(B) of the Bankruptcy Code, allowing a debtor to avoid a creditor's nonpossessory, nonpurchase-money security interest in otherwise exempt property. However, Congress did not clarify what items fit within the term "household goods" at that time.

In 2005, following the Bankruptcy Abuse Prevention and Consumer Protection Act, Congress implemented § 522(f)(4)(A) and (B) to clarify which items fit within the definition of "household goods." Despite the clarification that § 522(f)(4)(A) and (B) somewhat added, Congress neglected to classify firearms.

Although the topic of firearms is often highly debated, the predominant amount of American gun owners use firearms in a way that could arguably fit firearms within the classification of "household goods" referred to in § 522(f)(4)(A). The recent proposals of the Protecting Gun Owners in Bankruptcy Acts of 2010, 2011, 2014, and 2015, all of which request the addition of firearms into § 522(f)(4)(A), make this a timely issue that should be addressed. This Comment examines the recent proposals of the Protecting Gun Owners in Bankruptcy Act and discusses if Congress could realistically classify a firearm as a "household good" in the Bankruptcy Code.

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Introduction

More individuals own firearms in the United States than in any other country.¹ Americans own an estimated 110 million rifles, 86 million shotguns, and 114 million handguns.² Despite the prolific ownership of firearms³ in the United States, firearms have not been listed within or outside of the term "household goods" under § 522(f)(4)(A) or (B) of the Bankruptcy Code (the "Code").⁴ Sections 522(f)(4)(A) and (B) list several items that fall within or outside of the classification of "household goods."⁵ Section 522(f)(4)(A) and (B) present a modified version of the Federal Trade Commission's definition of "household goods," which was based on if a household item was a common necessity or had unique personal value.⁶

This Comment discusses firearms instead of other common household items and intersects with the Code because of the recent proposals of the Protecting Gun Owners in Bankruptcy Acts of 2010, 2011, 2014, and 2015, which have proposed adding firearms into § 522(f)(4)(A).⁷ The recent proposals specifically raised the question of whether firearms could actually belong in the Code and sought to allow a debtor to exempt a nonpossessory, nonpurchase-money security interest "not to exceed $3,000 in value, in a single firearm or firearms" under § 522(f)(4)(A).⁸

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Section 522(f)(4)(A) of the Code specifies certain items that are considered to be "household goods" for purposes of a debtor being able to avoid a nonpossessory, nonpurchase-money lien.⁹ On the other side of the statute, § 522(f)(4)(B) includes specific items that are not considered to be "household goods." By classifying a firearm as a "household good," a debtor may exempt the firearm during bankruptcy even if it is subject to a nonpossessory, nonpurchase-money security interest.¹⁰ Section 522(f)(4)(A) and (B) present a modified version of the Federal Trade Commission's definition of "household goods," which listed items that were common necessities or had unique personal value.¹¹ This Comment will show that the majority of gun owners in the United States own firearms for reasons that could allow a debtor's firearm to be classified as "household good" under § 522(f)(4)(A), which was modeled after the FTC definition.¹²

Following the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (the "BAPCPA") in 2005, Congress added § 522(f)(4)(A) and (B) to the Code to help determine whether a particular item fits within the "household goods" classification.¹³ Previously debated items, such as boats and motor vehicles, were excluded from the classification of "household goods" by § 522(f)(4)(B).¹⁴ Despite previous debate in bankruptcy courts of whether a firearm constituted a "household good" under § 522(f)(1)(B),

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Congress's revision of the Code in 2005 provided no clarification of where firearms were classified in § 522(f)(4)(A) or (B).¹⁵

Even though it is not unusual to find firearms in American homes,¹⁶ the Code has failed to take a stance on whether firearms constitute "household goods" in § 522(f)(1)(B).¹⁷ Other items that Americans commonly own, such as clothing, televisions, and radios, are listed as "household goods" under § 522(f)(4)(A).¹⁸ Moreover, Con gress has taken a definitive stance in § 522(f)(4)(B) by classifying commonly owned items such as motor vehicles, works of art, and jewelry, as not being "household goods."¹⁹ This Comment will now address and explain the background of § 522(f)(1)(B).

I. Background

Section 522(f)(1)(B) allows a debtor to discharge a creditor's interest in a particular piece of property if that property would be exempt without the existence of the creditor's lien or security interest.²⁰ Section 522(f)(1)(B) allows a debtor to avoid a nonpossessory²¹ , nonpurchase-money²² security interest²³ in any:

(i) household furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments, or jewelry that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor;

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(ii) implements, professional books, or tools, of the trade of the debtor or the trade dependent of the debtor; or
(iii) professionally prescribed health aids for the debtor or dependent of the debtor.²⁴

The implementation of § 522(f)(4)(A) and (B) was set out to define what items fit are considered "household goods" in § 522(f)(1)(B).²⁵

II. Background of § 522(f)(4)(A) and (B)

As enacted in 1978, the Code did not specifically define "household goods" for the purpose of lien avoidance under § 522(f)(1)(B).²⁶ As a result of BAPCPA, § 522(f)(4)(A) and (B) narrow the scope of "household goods" for purposes of lien avoidance for a debtor's otherwise exempt piece of property.²⁷ Below are the items that § 522(f)(4)(A) lists that are considered to be "household goods":

the term "household goods" means-

(i) clothing;
(ii) furniture;
(iii) appliances;
(iv) 1 radio;
(v) 1 television;
(vi) 1 VCR;
(vii) linens;
(viii) china;
(ix) crockery;
(x) kitchenware;
(xi) educational materials and educational equipment primarily for the use of minor dependent children of the debtor;
(xii) medical equipment and supplies;
(xiii) furniture exclusively for the use of minor children, or elderly or disabled dependents of the debtor;
(xiv) personal effects (including the toys and hobby equipment of minor dependent children and wedding rings) of the debtor and the dependents of the debtor; and
(xv) 1 personal computer and related equipment²⁸

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Congress also added § 522(f)(4)(B) to list items that are expressly not considered to be "household goods."²⁹

[T]he term "household goods" does not include-

(i) works of art (unless by or of the debtor, or any relative of the debtor);
(ii) electronic entertainment equipment with a fair market value of more than $650 in the aggregate (except 1 television, 1 radio, and 1 VCR);
(iii) items acquired as antiques with a fair market value of more than $650 in the aggregate;
(iv) jewelry with a fair market value of more than $650 in the aggregate (except wedding rings); and
(v) a computer (except as otherwise provided for in this section), motor vehicle (including a tractor or lawn tractor), a boat, or a motorized recreational device, conveyance, vehicle, watercraft, or aircraft.³⁰

Prior to BAPCPA, there were conflicting decisions on whether firearms constituted "household goods" for the purpose of lien avoidance.³¹ Some courts did not classify firearms as "household goods" because they were not viewed as essential to a debtor's fresh start.³² In contrast, other courts classified firearms as "household goods" because firearms supported the debtor's daily life and would assist the debtor's fresh start.³³ For example, the bankruptcy court in In re Crawford required a "functional nexus" between the item and the debtor's household.³⁴

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III. Reasoning behind § 522(f)(1)(B)

Congress recognized that creditors could coerce debtors by threatening repossession of certain goods that had little resale value but were necessary for a debtor's fresh start.³⁵ The creditors' ability to repossess certain items of the debtor gave them considerable leverage,³⁶ often prompting debtors to pay their obligations because they could not afford to replace the goods.³⁷ Congress authorized lien avoidance for household goods under the 1978 Bankruptcy Code to protect debtors from such threats of repossession.³⁸

As enacted in 1978, the Code did not define household goods for purposes of lien avoidance.³⁹ Courts generally adopted a broad definition of "household goods" that included certain basic items of personal property "kept in or around the home and used by the debtor or his dependents to support or facilitate day to day living within the home."⁴⁰

In 1985, the FTC defined "household goods" in the Trade Regulation Rule on Credit Practices.⁴¹ The FTC defined household goods as: "clothing, furniture, appliances, one radio and one television, linens, china, crockery, kitchenware, and personal effects (including wedding rings) of the consumer and his or her dependents."⁴² The FTC also excluded the following items from the "household goods" definition: "(1) Works of art; (2) Electronic entertainment equipment (except one television and one radio); (3) Items acquired as antiques; and (4) Jewelry (except wedding rings)."⁴³ The FTC formulated the definition by listing items that were common household necessities together with items that would be of unique personal value to the debtor.⁴⁴ Also, the FTC clarified what...