Colorado does not have an exemption that protects firearms. If you have moved from another state within the past two years, it may be possible to use a “wild-card” exemption to protect your guns.
Exemption for Tools of the Trade Sometimes Protects Guns:
If you are in law enforcement or work as a security guard, you may be able to use the “tools of the trade” or “business equipment” exemption to claim your guns as exempt in Colorado. This exemption is strictly construed in Colorado where you must show that your weapon is necessary for the performance of your job. If you must carry a gun to work in dangerous places, or you believe that owning a gun for personal protection in the home is wise, you may well be right but unfortunately the law in Colorado bankruptcy court is such that this alone will not protect your guns in the bankruptcy case.
Gun Trusts May Protect Guns in Colorado, But The Timing Must be Right and There is Risk:
When you put property in a trust you no longer own it legally. You may still have an equitable interest in the property however and your bankruptcy estate includes equitable property. Also, unless the transfer to the trust was made at least four years before a bankruptcy filing, you will likely see arguments that your transfer of guns to the trust was a “fraudulent conveyance.” This essentially means that although you are not trying to hide the property, the trustee can essentially get at the guns because your act in putting the guns in trust is presumed to be fraudulent within certain times and while you are insolvent.
Selling Your Gun(s) Before Filing a Bankruptcy:
This is something many Colorado families do not want to do. People are attached to their guns and rightly tend to value their Second Amendment rights. But, it is perfectly legal to sell guns in advance of filing for bankruptcy as long as you do so to an independent third party for a fair price. The court will ask about sales to anyone and it’s not against the law to sell to friends, but of course there are special rules that apply to sales to friends or family members. This type of sale gets special attention from the Trustee and Court.
If the gun or guns are replaceable models that are generally available, it is best to sell them to an independent third party in a safe and documented transaction for a fair price and then put that money into an exempt asset before you file. After your case is over, you can go repurchase any gun that is important to you.
Including Your Guns in the Bankruptcy Estate:
This has the disadvantage that you must of course declare the gun(s) and state their value. If they are worth more than a few hundred dollars the trustee will likely be interested in the guns. You can still keep these guns as long as you are willing to pay the fair market value of them. If your gun is a family heirloom or just plain important to you for hunting, or for whatever reason you choose to keep it, you may do so simply by paying its value to the trustee. The trustee in your case would much rather get the money for the gun, or any item, than take the time to collect the gun and resell it to generate assets for your creditors. This will cause your case to be an “asset” case which has certain disadvantages such as the trustee will then try to collect other items like wages due at filing. However, if a gun is important to you it may be worth it in your circumstance.
A chapter 13 case also protects non -exempt assets. So if you have extremely valuable guns that you do not want to part with, you can file a chapter 13 and pay some of your debt over time. This is yet another way to protect your guns while still getting the advantages of a bankruptcy filing.
Summary:
Guns are not exempt in Colorado, meaning you could lose them in a bankruptcy case unless you plan ahead. You can sell your guns in advance of bankruptcy to an independent third party for a fair price and replace them later, or you can pay the value of your guns in to the bankruptcy trustee in order to keep them. You cannot give them to friends or family or “hide” them, this is a federal crime and very much not worth it given there are other, legal ways to protect your gun ownership rights.
Preparation is the key to success in any legal matter. I have a lot of experience protecting guns for Coloradans and if you need bankruptcy relief but also have guns that are important to you pleas