(Reuters) - As the National Rifle Association wades deeper into what will likely be a very contentious bankruptcy case, its ability to use the Chapter 11 process to reincorporate in Texas is expected to face challenges from creditors and regulators and has even prompted questions from a member of its own board.

Although the case, which was filed last month in the U.S. Bankruptcy Court for the Northern District of Texas, has not yet reached the issue of whether the organization can use the bankruptcy process for its stated purpose of moving itself from New York to Texas, it could, experts say, eventually become a test case for the question of when Chapter 11 protection is sought in "good faith", as required by bankruptcy law.

NRA board member Phillip Journey, who is also a Kansas state judge, on Monday filed papers asking U.S. Bankruptcy Judge Harlin Hale for the appointment of an examiner to investigate the organization's management and whether it followed its own internal policies before filing for bankruptcy. A potential investigation, combined with the New York Attorney General keeping a close eye on the case, could cause issues surrounding the propriety of the bankruptcy filing to surface soon.

The NRA's Chapter 11 filing last month came while it was facing a lawsuit brought by New York Attorney General Letitia James, who is asking a New York federal court to dissolve the group. The lawsuit accuses the NRA of financial misconduct, saying it diverted millions of dollars to luxury trips for its officers, private jets, and no-show contracts for associates.

Now, nearly a month into the bankruptcy case, Journey says management violated the NRA's own bylaws by failing to notify the board that it was planning to seek Chapter 11 protection and is asking the court to look into whether management received excessive compensation, as well as its actions before the bankruptcy was filed.

NRA attorney William A. Brewer III said in a statement that the bankruptcy filing was, in fact, endorsed by board members.

"Judge Journey purportedly supports the mission of the NRA and claims not to oppose the Association seeking to reincorporate in Texas," Brewer said. "Unfortunately, he seems to mistakenly believe the NRA reorganization plan did not follow board and internal protocol. This plan was undertaken in full compliance with NRA policy."

The NRA has previously denied the allegations in James' lawsuit calling it politically motivated.

In a press release announcing its bankruptcy filing last month, the NRA said its goal in Chapter 11 is to move its place of incorporation from New York to Texas to "exit what it believes is a corrupt political and regulatory environment in New York." The press release also stated that the NRA "is in its strongest financial condition in years" and quoted CEO Wayne LaPierre saying "obviously, an important part of this plan is 'dumping New York.'"

That statement could prove troublesome for the non-profit. While being insolvent is not a requirement for bankruptcy, it can be a factor in determining whether the case was filed in good faith, which a debtor must prove to obtain confirmation of a reorganization plan. An entity that takes advantage of the benefits and protections afforded by Chapter 11 when it's not in financial distress can suggest that it's seeking those benefits for reasons that don't meet bankruptcy law requirements, experts say.

Anthony Casey, a bankruptcy and business law professor at The University of Chicago Law School, said in an interview that the NRA's statement touting its healthy financial position alone likely won't get the bankruptcy thrown out, but it can be used as evidence.

"If that's true," he said of the NRA's claim that it's in a strong financial health, "that's the most solid dismissal for lack of good faith I've ever seen. That's just a slam dunk."

The NRA's lawyer, Patrick Neligan of Neligan LLP, told Hale a few days after the organization filed for Chapter 11 relief that it was "not in any way attempting to escape regulatory supervision" from the New York attorney general.

Neligan also said the NRA is facing many more lawsuits than just New York's and that part of its reason for filing for bankruptcy was to centralize all of that litigation in an orderly way.

While consolidating widespread litigation that could result in massive financial liabilities is generally considered a legitimate use of bankruptcy, the statements about exiting New York's regulatory environment will not help its position that the bankruptcy was filed in good faith, experts say.

Journey's motion doesn't explicitly address potential bad faith issues. But it does ask Hale to appoint an examiner to "bring to light the veracity of the alleged fraud, dishonesty, incompetence, and gross mismanagement that has plagued the NRA's reputation."

Journey said while he still supports the NRA's mission and doesn't necessarily oppose a move to Texas, he wants management investigated as part of the bankruptcy.

The question of good faith could surface if the motion is granted and an independent party is tasked with probing management's actions, especially in light of Journey's contention that board members did not know it was going to file for bankruptcy.

The good news for the NRA is that bankruptcy judges are generally reluctant to throw out cases due to a lack of good faith alone, in part because it can be difficult to prove, experts say. And the NRA certainly isn't the first to file for Chapter 11 protection in the face of burdensome litigation.

Additionally, it's not uncommon for companies that file for Chapter 11 to make public statements aimed at assuaging consumers, John Pottow, a professor of commercial law at the University of Michigan Law School, said in an interview. But the specific claims made in NRA's press release could force a court to consider bad faith.

"This could become an important case in what bad faith parameters are," Pottow said.