Cars, guns and jewels: Oregon offers more ways to protect assets in ...

They say politics can make strange bedfellows. Apparently bankruptcies can too.

Gun proponents and consumer advocates found themselves on the same side of legislation this year that boosts the amount of assets many consumers can keep if they file for bankruptcy.

Perhaps because of that unusual and broad-based alliance, Senate Bill 396 sailed through the Legislature relatively unnoticed. It was a big victory for consumers in a session known as much for what wasn't accomplished (major reform of the public pension system) as for what was (minor reform of the public pension system).

We'll save the analysis of the session's impact on Public Employees Retirement System members for another time. The accompanying list notes other bills passed by the 2013 Legislature that potentially protect consumers. You'll also find several proposals that didn't survive, falling victim to intense lobbying by the insurance and finance industries.

This column normally aims to keep people out of bankruptcy. But life and unforeseen medical bills happen. So bear with me and you'll see why these tweaks in the bankruptcy law were overdue.

The bill began as a way to shelter health savings accounts, or HSAs, which I've written about a lot lately. Portland attorney Mackenzie Keith noticed that bankruptcy laws didn't shield these relatively new but increasingly popular accounts from creditors the way laws shelter retirement accounts.

Keith feared bankruptcy courts might start tapping the accounts, forcing people to pay tax penalties to liquidate them. They'd also lose what they've saved for medical expenses not covered by their high-deductible health plans.

Seemed fair enough. Things got more interesting when the bill was amended to boost exemptions long sought by consumer attorneys.

Bankruptcy law allows individuals to keep a certain amount of assets so they can continue with their lives as they pay off their debts.

Exemptions vary state to state. Oregon's, frankly, had fallen behind the times. Oregonians can shield up to $50,000 in home equity but only $3,000 for a car and $1,800 worth of jewelry. Exemptions in nearby states are higher.

"If you have a car worth more than $3,000, the (bankruptcy) trustee can force you to sell it," said Angela Martin, director of Economic Fairness Oregon, a consumer advocacy group.

Same for guns worth more than $1,000, as Dan Blackstone recently discovered.

With his real estate and development business sunk by the downturn, Blackstone and his wife filed for bankruptcy protection last year, listing $1.4 million in assets and $1.8 million in debts. Among those assets: a dozen pistols and two rifles he used in his new Hillsboro business, Blackstone Gun Safety.

Amy Mitchell, the trustee assigned to recover money for creditors from the Blackstones, soon eyed those guns, court records show.

That's because Oregon law allows individuals to shield only one long-barrel gun and one short-barrel gun, and not more than $1,000 worth of firearms. Plus, Mitchell initially wasn't buying the argument by the Blackstones' attorney, Todd Trierweiler, that the guns were protected by a separate $5,000 "tools of the trade" exemption.

Blackstone sent written testimony in support of the bill. So did Michael McCarter, executive director and range master at Albany Rifle and Pistol Club, a 2,500-member gun club.

"Many people want short guns for personal protection, long guns to get food, and shotguns or other firearms for recreation, protection or other uses," Blackstone wrote. He said he doubted court officials would get much from selling guns. "At best they would get a few hundred dollars from selling people's guns, when in reality the gun is much more valuable to the individual."

Only 11 of 90 legislators voted against the bill, which took effect July 1. The new law allows Oregonians to claim federal bankruptcy exemptions, which in some cases are higher.

In particular, federal law gives individuals a "wild card" exemption worth up to $12,725 that they can use to shield a variety of assets: autos, guns, jewelry, cash, even tax refunds. Oregon's wild card is only $400.

"The idea is that we don't want to put them down so far that they can't get back up, but leave them with a base level of assets so they can restart with their business or, as a family, continue with their basic needs," Martin said.

Mitchell, in the meantime, has backed off seizing Blackstone Gun Safety's assets. A liquidator deemed the guns worth $4,500, about the same as the business's liabilities. That made the business assets "of burdensome and inconsequential value," she decided. Blackstone said he also offered a cash settlement "to make it go away."

Kent Anderson, a Eugene bankruptcy attorney who lobbied hard for the bill, said Oregon's new protections are now more in line with those in California and Washington. That should give renters and people looking to start small businesses some reassurance that they won't lose everything if they hit hard times.

"This helps people who are not homeowners or who don't have significant equity in their home," Anderson said. "It keeps us up with the Joneses."

-- Brent Hunsberger welcomes questions about his columns or blog. Reach him at 503-221-8359 or bhunsberger@oregonian.com. ?

Source: http://www.oregonlive.com/finance/index.ssf/2013/07/cars_guns_and_jewels_oregon_of.html

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