The US firearms lobbying group, the National Rifle Association (NRA), lost its bid to declare bankruptcy on Tuesday, hampering an attempt to avoid a lawsuit in New York.

Federal Judge Harlin Hale issued his decision from Dallas, Texas, saying that the gun-rights group had not filed for Chapter 11 protection in good faith, but rather to avoid oversight by New York Attorney General Letitia James.

A successful bankruptcy declaration would have given the NRA an "unfair litigation advantage," the judge said.

The group filed for bankruptcy in January after the state of New York brought financial fraud and misconduct charges back in August.

What did the judge say?

Judge Hale singled out the chief executive of the NRA, Wayne Lapierre, for his lack of input from other members within the organization when filing the bankruptcy claim.

"Excluding so many people from the process of deciding to file for bankruptcy, including the vast majority of the board of directors, the chief financial officer and the general counsel, is nothing less than shocking," Hale wrote.

"The question the court is faced with is whether the existential threat facing the NRA is the type of threat that the Bankruptcy Code is meant to protect against," Hale added. "The court believes it is not."

LaPierre appeared to accept the decision, saying that the NRA would stay independent "even as we remain in New York to confront our adversaries."

How did the New York Attorney General respond?

Attorney General James welcomed the court's decision, saying on Twitter that: "The NRA does not get to dictate if and where it will answer for its actions, and our case will continue in New York court."

The New York lawsuit claimed that the NRA and LaPierre had used money from dues and donations for their own "personal piggy bank."

According to the charges, they had spent tens of millions of dollars on themselves, violating laws governing non-profit organizations.

Why did the NRA file for bankruptcy?

The group, a close ally of the Republican Party, decided to reorganize in the more gun-friendly state of Texas and to reform as a limited liability corporation with nonprofit status.

In its bankruptcy filing, the NRA listed between $100 million (€82.8 million) and $500 million in assets and a similar amount in liabilities.

The group was also forced to fire dozens of employees and cancel its annual convention — with a big hit on fundraising — during the coronavirus pandemic.

ab/wmr (Reuters, AP)