What Are the Alaska Bankruptcy Exemptions?

What Are the Alaska Bankruptcy Exemptions and Why Are They Important in a Chapter 7 Bankruptcy? 

Exemptions can play a key role in any decision to file bankruptcy. When you’re thinking about filing for Chapter 7 bankruptcy, one of your primary concerns is likely wondering what property you can keep. This is a fair concern since the basic premise of Chapter 7 bankruptcy is that you liquidate or sell your property to help pay toward your debts before you can walk away from them for good. 

It’s also fair to say, however, that an important purpose of bankruptcy is to allow for a fresh start. Any fresh start would be compromised if you were starting entirely from scratch, so bankruptcy exemptions exist to help you protect some (and possibly even all) of your property.

Exemptions are specific bankruptcy laws that allow filers to protect different types of real or personal property up to varying amounts, but the idea is for a debtor to be able to maintain a basic standard of living. Beyond that basic standard, however, everything is fair game, so an investment or luxury property would likely become part of the bankruptcy estate and be sold by the bankruptcy trustee and shared among your unsecured creditors, such as credit card companies. Any dispute about this will be resolved by the bankruptcy court.

Does Alaska Allow Filers To Use Federal Bankruptcy Exemptions?

Every individual state has its own set of bankruptcy exemptions available to residents. Bankruptcy exemptions also exist at the federal level in the United States Bankruptcy Code. Some states, including Alaska, allow their residents to choose between the state and federal exemptions.

To be clear, you can’t pick and choose among all of the individual exemptions, rather you can decide which set you want to use, but then you are limited to the options within that set. If you decide to go with Alaska state exemptions, you can also supplement those with any federal nonbankruptcy exemptions that may apply.

If you’ve lived in Alaska for less than two years, however, you aren’t eligible to use the Alaska state exemptions. There is a residency requirement of two years (also referred to as the 730-day rule) before being able to use a state’s exemptions. In that scenario, you’ll need to look back to where you lived previously, for the majority of the six-month period beginning two and a half years ago. 

Alaska Bankruptcy Exemptions

Real Property: The Alaska Homestead Exemption

Alaska offers a very generous homestead exemption when it comes to protecting the equity in real estate used as your home, allowing filers to protect up to $72,900. Married couples filing jointly can’t double this exemption amount, but the single filer total under Alaska state guidelines is more than doubling the federal homestead exemption.

The federal bankruptcy exemptions offer a homestead exemption of $27,900 in real property (which married couples can double.) This also includes mobile homes and co-ops, or burial plots plus the unused portion of the homestead exemption up to $13,950 can be used for other property.

Personal Property Exemptions

Alaska filers who are married filing jointly and have elected the state exemptions can double the exemption amount for each personal property category, so long as each spouse has an ownership interest in the property. The only exception to doubling the exemption amount is the above homestead exemption.

Motor vehicle $4,050 in equity in your car or another vehicle is protected, as long as the market value of your vehicle is no more than $27,000. Married couples filing jointly could exempt up to $8,100 in vehicle equity. Under federal exemptions, an Alaskan filer could protect up to $4,000 equity in a motor vehicle. To determine the equity in your car, subtract the balance left owing on your car loan from the value of the car. 

Household goods and clothing, books and instruments, and portraits and heirlooms, up to $4,050 in value. Married couples filing jointly could double this to protect up to $8,100 of combined value. Federal bankruptcy exemptions combine clothing along with animals, crops, appliances and furnishings, books, household goods, and musical instruments up to $625 per item, and up to $13,400 total. 

Alaska exemptions protect jewelry up to $1,350. Here again, married couples can double, protecting up to $2,700 of jewelry combined. The federal exemptions protect up to $1,875 in jewelry. 

Alaska filers also have a specific exemption law for their pets. Each filer can exempt pets up to $1,350 in value. Federal laws don’t offer any comparable protections specifically for pets.

Beyond the above personal property exemptions for particular items or categories, the Alaska exemptions also protect the following personal possessions in full: 

• Apartment or condo owners' association deposits

• Burial plot for the individual or individual's family

• Necessary health aids for individual or dependent

Health aids are also protected in full under federal exemptions.

Miscellaneous Property Exemptions

Alaska also offers exemptions for the below miscellaneous personal property items, either in full or for the amount stated:

• Property of a business partnership

• Liquor licenses

• Permits for limited entry into Alaska Fisheries

• Tools of the trade — Alaska exemptions protect professional books and tools of trade up to $3,780. The federal exemptions protect Implements, books, and tools of the trade, up to $2,800.

One item to note is that Alaska bankruptcy exemptions don't include a wildcard exemption. Wildcard refers to an extra monetary amount that you can apply to any personal property beyond what's explicitly listed if you want to protect it while in bankruptcy. The federal exemptions, however, offer a fairly generous wildcard exemption of $1,475 of any property, and the unused portion of homestead exemption up to $13,950.

Money Benefits

Some exempt property that can’t be touched can be in the form of money or benefits. Alaska laws protect the below money or benefits up to the amounts stated:

Wages are protected under Alaska exemptions for weekly net earnings up to $473. The maximum monthly exemption for cash and other liquid assets is $1,890. An Alaskan individual who does not receive earnings either weekly, semi-monthly, or monthly is entitled to a maximum exemption for the aggregate value of cash and other liquid assets available in any month of $1,890.

The below benefits or payments are protected in full under the Alaska exemptions. Except for tuition credits, there is a complementary provision under the federal exemptions as well.

• Child support distributed via a collection agency. Child support is also fully protected under the federal exemptions.

• Alimony (to the extent wages are exempt). Alimony is also fully protected under the federal exemptions.

• Tuition credits under advance college payment contract.

• Crime victim reparations. Also protected under federal exemptions.

There are also some insurance benefits protected for Alaskan filers. The below insurance benefits are protected up to the amount stated or in full:

• Unmatured life insurance policies and annuity contracts up to $500,500.

• Disability benefits for Alaska filers are protected in full. Federal exemptions also offer this protection without limit.

• Fraternal benefit society benefits are protected in full.

Federal bankruptcy exemptions protect the following under insurance: 

• Life insurance payments from a policy for the person you depended on, needed for support

• Life insurance policy loan value, in accrued dividends or interest, to $14,875

• Unmatured life insurance contract, except credit insurance policy.

Other Alaska Exemptions

Alaska state exemptions also protect many public benefits in full, whether you happen to be in a bankruptcy case or are facing a garnishment. They are as follows:

• Unemployment compensation

• Alaska longevity bonus

• Prescription drug benefits for senior care, and Alaska benefits for low-income seniors

• Workers' compensation

• General relief assistance

• Assistance to blind, elderly and disabled adults.

Similarly, under federal exemptions, the following public benefits are protected in full: public assistance, Social Security, veteran’s benefits, and unemployment compensation. Again, this is both within the context of bankruptcy or not.

Finally, both Alaska exemptions and federal laws offer protection for retirement accounts and pensions. The Alaska state exemptions cover the following pension benefits in full:

• Any pensions or retirement accounts for teachers, judicial and public employees, and elected officers

• ERISA-qualified benefits (deposited more than 120 days before filing)

• Medical savings accounts

• Pension benefits

Federal exemptions, by contrast, protect all types of retirement funds and accounts that are tax-exempt under IRC section 401, 403, 408, 408A, 414, 457, or 501(a) in full. Federal exemptions limit IRAs & Roth IRAs to $1,512,350 (excluding rollover contributions), but this limitation could be overruled by a judge in the bankruptcy court. 

Filing Chapter 7 bankruptcy? 

Making sure that you can protect the property that you want is an important factor in any decision to file bankruptcy. It can be beneficial to sit down with an Alaska bankruptcy attorney in person to discuss your options. Most bankruptcy law firms offer a free consultation so that you can get this assurance without a personal commitment upfront. A bankruptcy attorney can also help confirm that you're on the right path with your intended Chapter 7 bankruptcy case, and let you know if Chapter 13 bankruptcy might be a better fit for your personal circumstances and financial goals.

If you're committed to moving forward with a Chapter 7 bankruptcy but can’t afford to pay attorney fees, there is an option to do so on your own. This can be a little intimidating, so feel free to check out Upsolve’s online screener to see if you qualify to use our online web app for free to help you prepare your bankruptcy forms.