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Bankruptcy: Alaska

Filing bankruptcy in Alaska provides honest debtors an opportunity to find relief from crippling debt and allows creditors to receive some repayments based on the value of the debtor’s property or reliability of earnings.  1,040 bankruptcies were filed in Alaska in 2010, ranking Alaska 27th in the nation for the number of bankruptcy filings per capita.  83% of Alaskan bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Alaska

Bankruptcy in Alaska is governed by federal law and all bankruptcy cases are initiated in the US Bankruptcy Courts in Anchorage, Fairbanks, Juneau, Ketchikan and Nome. Although federal courts have exclusive jurisdiction over bankruptcy proceedings, Alaskan petitioners may select exemptions from either the federal or state lists when determining what personal property the petitioner is permitted to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Alaska

Chapter 7 bankruptcies in Alaska are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who do not have a significant amount of assets, such as investments and substantial equity in a home. This is because a Bankruptcy Trustee may liquidate personal property that isn’t protected by Alaska’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Alaska’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets are strictly off-limits to creditors looking for repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Alaska Bankruptcy Exemptions

Alaska’s state laws designate specific property exemptions that allow debtors to keep certain personal property and assets in bankruptcy so they can move forward and be productive members of society. Bankruptcy law in state of Alaska allows debtors to choose exemptions from the state or federal lists.

Property exemption amounts are subject to change and are no longer updated in the state statutes, so it is imperative that an Alaska bankruptcy attorney is consulted before making a decision of this magnitude.  Alaska’s key exemptions include:

Alaska Homestead Exemption

  • $70,200 (Husband and wife may each claim a portion)

Alaska Personal Property Exemption

  • $3,900 total: Books, musical instruments, clothing, family portraits, household goods, and heirlooms
  • $1,820 total:  Cash or other liquid assets; $2,860 for sole wage earner in household (wage restrictions apply)
  • $1,300 total:  Jewelry
  • $3,900 total: Motor vehicle; value not exceeding $26,000
  • $1,300 total: Pets
  • Money held in mortgage escrow accounts after July 1, 2008
  • Deposit in apartment or condo owners’ association
  • Building materials
  • Health Aids
  • Benefits for low income seniors
  • Wages exempt for personal injury and wrongful death recoveries
  • Tuition credits (advance college tuition payment contract)
  • Burial plots

Alaska Tools of Trade Exemption

  • $3,640 total: Implements, books and tools of trade

Alaska Wage Garnishment Exemption

  • Weekly net earnings to $456; $716 for sole wage earner in a household
  • If wages are not received weekly or semi-monthly, can claim $1,820 in cash or liquid assets paid any month; $2,860 for sole wage earner in household

Alaska Public Benefits Exemption

  • 20% of permanent fund dividends
  • Aid to blind, aged, disabled and general relief assistance
  • Workers’ and unemployment compensation
  • Senior care (prescription drug) benefits
  • Alaska longevity bonus
  • Federally exempt public benefits paid or due
  • Crime victims’ compensation

Alaska Insurance Exemption

  • Disability benefits
  • Fraternal benefit society benefits
  • Medical, surgical or hospital benefits
  • $100,000 total aggregate cash surrender value: Life insurance or annuity contract(s)

Alaska Pensions and Retirement Savings Exemption

  • Only benefits accruing for Judicial employees, elected public officers, public employees and teachers
  • Other pensions, to extent wages exempt
  • ERISA-qualified benefits deposited more than 120 days before filing bankruptcy
  • Roth and traditional IRAs, medical savings accounts

Alaska Miscellaneous Exemptions

  • Alimony, to extent wages exempt; Child support payments made by collection agency
  • Liquor licenses
  • Property of business partnership

Chapter 13 Bankruptcy, Alaska

In 2010, 17% of debtors petitioned for protection under Chapter 13 bankruptcy laws in Alaska.  With Chapter 13, a court-appointed Trustee works on behalf of the petitioner to reorganize debts and develop a 3-5 year repayment plan, by which creditors are paid off using the debtor’s future earnings.  Chapter 13 petitioners keep most – or all – of their property.

How to File Bankruptcy in Alaska

Eligibility for property exemptions may have an impact on your decision to file for bankruptcy. With a choice of federal or state exemptions to consider, the goal is to determine which system will allow you to keep your major assets and qualify your debts for discharge.  Every case is different, and an Alaska bankruptcy attorney can help you review your facts and decide whether Chapter 7 or Chapter 13 bankruptcy is the best option for your situation.

Bankruptcy Attorney: Alaska

It is the debtor’s responsibility to know their rights and obligations as bankruptcy petitioners.  An Alaska bankruptcy attorney can break down and simplify the federal laws and state exemptions for those considering bankruptcy protection.  Personal bankruptcy cases can be incredibly complex and stressful, and the bankruptcy advice and guidance of an Alaska bankruptcy attorney in these situations is a worthwhile expense.