Alaska Bankruptcy

Just moved to Alaska and thinking about bankruptcy…better know your numbers: 180, 730 & 910!

In the past year, we’ve had a number of bankruptcy inquiries from new arrivals to our great state.  While we’re always available for a 15-minute complimentary consultation via Zoom or telephone, it’s a good idea to do some quick math on your own to see if and when you can file in Alaska and if you will be able to use Alaska’s exemptions to protect some or all of your property after filing.

Bankruptcy is federal law, and section 1408 of title 28, United States Code (“U.S.C.”), sets forth the “Venue for cases under title 11,” which is where Bankruptcy Law is codified in the U.S.C.  Section 1408 requires a debtor file the bankruptcy petition in the bankruptcy court located in the “district” where the person’s domicile, residence, principal place of business or principal assets have been located 180 days or “for a longer portion of such [180 days]” (basically, 91 days) immediately before filing the bankruptcy case. It’s easy to find the right Bankruptcy Court in Alaska because there is only one, and it’s located in Anchorage.  So, the only calculation necessary is to find out “when” you can file for bankruptcy in Alaska.  Simply count 91 days from the date you arrived in Alaska to establish your domicile or residency, and you’ve met the venue requirement for filing here.

The next part is a bit tricky.  Now, you’ll want to know if you can use Alaska’s exemptions to protect your property (see Alaska Statute 09.38.010 – .510) or if you’ll have to look to the exemptions of your prior state.  Here, filers must look back two years or 730 days from the date of filing their bankruptcy petition to where they were domiciled in order to figure out if the exemptions under Alaska’s law are available or if the prior state’s laws apply. So, if you’ve lived in Alaska for 730 days (2 years), you can choose to use the Alaska or the federal exemptions for your bankruptcy case because Alaska lets you choose between the two.   If not, you’ll have to use the exemptions in your prior state or see if your prior state allows you to choose the federal exemptions.  If the prior state has “opted out” of the federal exemption scheme (see 11 U.S.C. § 552(b)(2)); however, you’re stuck using the prior state’s exemptions.

If you didn’t live in the prior state the entire 730 days, you’ll need to look back a total of 910 days or another 180 days (or the majority of 180 days, i.e., 91 days again) before the 2 years to find the state exemptions that must be used.  In other words, if you did not live 730 days in the state you left before coming to Alaska, you’ll need to count back another 180 days from two years (between 730 to 910 days before filing your bankruptcy case) and use the exemption laws (or federal exemptions if permitted under this state’s laws) where you lived during this period.  It gets even more complicated if that state “opted out” of allowing a debtor to use the federal exemptions in lieu of the state exemptions and also imposes a residency requirement to use its state exemptions in the first place.  In that case, the Bankruptcy Code will allow the debtor to use the federal exemptions.

Why all the math?  Congress enacted 11 U.S.C. § 552(b)(3) in 2005 to prevent bankruptcy exemption “forum shopping” or the practice of moving to a new state to protect more property from liquidation by a trustee to repay creditors in a bankruptcy case.  Bankruptcy rules are complicated, which makes it important to seek advice from an Alaska bankruptcy attorney before taking any actions related to a bankruptcy filing.  But, by applying the 180, 730, and 910 rules, you can at least determine whether you can file in Alaska and what exemptions you may be able to use to protect your property in a bankruptcy action.

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