Texas flag (U.S. state) Gun Control USA. United States Gun Laws.With more than 5 million members, the National Rifle Association (NRA) commands a presence wherever it goes. Founded in 1871 in New York, the organization seeks to improve marksmanship skills and defend gun ownership rights.
However, the NRA may soon be carrying out its mission from a new home base. They’ve just announced plans to reincorporate in Texas. The announcement comes as they also file for Chapter 11 bankruptcy protection.
What Is the NRA’s Chapter 11 Bankruptcy?
The NRA’s Chapter 11 bankruptcy is a filing for the reorganization of debts. In a Chapter 11 filing, a business may remain open and continue to operate while addressing outstanding obligations. Both corporations and non-profit organizations may take advantage of the protections offered by a Chapter 11 filing. While individuals can use a Chapter 11 status, it’s rarely done because Chapter 7 or Chapter 13 bankruptcy are typically more advantageous for individuals.
What Will Happen to the NRA in Chapter 11 Bankruptcy?
The NRA has 120 days after their bankruptcy filing to propose a plan to address debts. The plan must allow for payment of creditors in relation to income and the organization’s ability to make payments. Any repayment plan must be in the best interests of the creditors. If the bankruptcy filer fails to file a reorganization plan, a creditor may submit their own plan.
Disclosures are required as part of the resolution to the bankruptcy. The organization that files must list its assets and its creditors. This process is to ensure that the filing is fair and that decisions are made based on the full range of facts. A Chapter 11 reorganization does not require complete liquidation of assets.
Who Gets Paid in the NRA Bankruptcy?
To determine who gets paid in the NRA bankruptcy, the court works down a list of creditors. Secured creditors with a lien on property have the highest priority. From there, debts are divided into higher and lower priority.
Can a Non-Profit Organization File for Bankruptcy?
Yes, a non-profit organization can file for bankruptcy. Who makes the decisions in the bankruptcy depends on whether the organization is a member or non-member non-profit. Non-profit organizations contribute millions of dollars to the economy each year. They have assets and debts like individuals and businesses. For that reason, the bankruptcy process is in place to allow them to manage debt similarly to individuals and organizations.
Why Did the NRA File for Bankruptcy in Texas Instead of New York?
It is significant that the NRA filed for bankruptcy in Texas instead of New York. All bankruptcy cases go to federal court. However, there are different state laws for what exemptions apply. These differences can have a major impact in terms of the final outcome of the case. Even though the bankruptcy must be filed in one location, usually based on residency, it can still involve property that is located in other places. There are residency requirements for bankruptcy filings.
NRA Creditor Ackerman McQueen
The NRA has a few significant creditors. Their top creditor is Ackerman McQueen (also known as “Ack-Mac”), an advertising agency that produced work for the NRA. Ackerman McQueen says that the NRA owes them $1.2 million.
According to an article published in The Las Vegas Sun 1, the NRA disputes that amount and says that the company overbilled them for services. The NRA also allegedly owes $960,000 to Membership Marketing Partners, LLC, and another $200,000 to Speedway Motorsports, the company that owns and operates NASCAR tracks. The NRA says that they have between $100 and $500 million in assets and outstanding debts.
New York’s Response to NRA Bankruptcy and Moving
From a press release from New York Attorney General Leticia James 2, New York officials aren’t saying goodbye to the NRA quietly. They say that the organization diverted NRA funds to private use. In a complaint, they accuse officials of abusing their fiduciary duties for personal gain. They also note that the move to Texas is an attempt to evade accountability and oversight.
The New York Attorney General is calling on those involved to make restitution and pay penalties. She also added that both the finances and morals of the NRA are bankrupt. When there are allegations of fraud, dishonesty or gross incompetence, a trustee may become involved in the bankruptcy. The NRA has a right to contest New York’s allegations.
Along with the announcement to reincorporate in Texas, subject to court’s approval, its headquarters in Fairfax, Virginia would not be relocating.
How Long Will the NRA Bankruptcy Take?
Because the NRA bankruptcy is a Chapter 11 filing, it may take a significant amount of time to resolve. A Chapter 11 filing can take as long as two years to resolve. Chapter 11 filings are particularly complicated because they involve repayment of debts while continuing to operate. Filers can expect significant scrutiny regarding their assets and the ability to repay debts.
Related: Timeline of Bankruptcy Filing Requirements in Las Vegas
Using Bankruptcy Filings To Address Debt
Bankruptcy filings may be a strategic way to address debt. Whether the filer is a for-profit corporation, non-profit entity or an individual, there are a number of ways that bankruptcy can help them address their current financial situation and get a fresh start. It’s essential to understand what bankruptcy can accomplish and tailor a filing to the client’s specific needs.
An individual or organization may work with an experienced bankruptcy attorney in order to identify the most advantageous form of filing, understand the possibilities and limitations of filing, and work to earn the most favorable result.
Sources:
1 Weber, P. J., & Sisak, M. R. (15 January 2021). NRA declares bankruptcy, plans to incorporate in Texas. Retrieved 20 January 2021 from https://lasvegassun.com/news/2021/jan/15/nra-declares-bankruptcy-plans-to-incorporate-in-te/
2 Office of New York Attorney General. (6 August 2020). Attorney General James Files Lawsuit to Dissolve NRA. Retrieved 20 January 2021 from https://ag.ny.gov/press-release/2020/attorney-general-james-files-lawsuit-dissolve-nra
