With all of the recent discussion of gun rights in the U.S., East Tennessee residents might find a recent bankruptcy case intriguing. There is liability attached to gun ownership and gun sales. So how does a business that deals with and owns guns handle Chapter 7 liquidation?
Advanced Interactive Systems Inc. recently filed for Chapter 7. This type of bankruptcy involves the sale of assets to pay off debt. Any debt remaining after the auction or sale of assets is discharged. In the case of Advanced Interactive Systems, the company is in the business of training security personnel, and to do that, the company owns many guns and a number of shooting ranges.
In fact, Advanced Interactive Systems owns at least one AR-15 rifle, a controversial weapon lawmakers have considered banning. Because the company hurriedly filed for bankruptcy, the exact number of weapons in its inventory wasn't yet unclear, but at least 15 firearms in the company's safe were listed in the inventory, along with many gun parts.
Often, Chapter 7 bankruptcies involve auctions to sell off property. But when firearms are involved, the appointed trustee in a bankruptcy can get permission to skip the auction process and sell the weapons to a licensed dealer in hopes of getting a better price. A trustee can end up being held liable, though, if a buyer goes on to use the gun illegally.
Another option is to find a buyer who will take the entire business while it is still in operation. That method could help limit liability.
This particular case involves a gun-owning business in Florida, but companies in Tennessee may have similar concerns. The best course of action is to consult with a bankruptcy attorney with experience in Chapter 7 and Chapter 11 filings.
Source: Thomson Reuters News & Insight, "Company's bankruptcy leaves behind cache of weapons," Tom Hals, March 15, 2013