Even as increasing numbers of Alaskans file for Chapter 7 bankruptcy to help themselves push through economic troubles and eliminate their outstanding debts, many of these interested consumers do not seem to fully recognize the changes that have been made to bankruptcy protection in recent years. In 2005, lobbyists for the credit card industry pushed through legislation that severely curtailed the federal protections available for Chapter7 and Chapter 13 bankruptcies. At the time, considering the American economy was doing rather better at that time, nobody quite noticed how seriously these alterations would affect potential borrowers needing their services. After the Bankruptcy Abuse and Consumer Protection Act, as written by the congress and approved by the president, debtors – among many, many other small changes – will not be able to select their own form of bankruptcy. If borrowers make more than the median income of their state, they can no longer qualify for the Chapter 7 debt elimination bankruptcy program and will instead be entered into the Chapter 13 program which only restructures the debts and has little to no reduction of the actual debt balances. To be honest, Chapter 13 bankruptcies are more similar to a form of Consumer Credit Counseling with harsher penalties for skipped payments, oversight by court trustees who have no reason to attempt to help the borrowers’ families stay afloat through hard times, and absolute horrors wrought upon the borrowers’ credit ratings and FICO scores for up to a decade following discharge. Obviously, the Alaskan median income regularly changes, but expect two person household incomes above sixty five thousand (with three and person households above seventy thousand) to be forced toward Chapter 13 protection.
If your provable earnings are beyond what will be considered the median income for Alaska, there is still another avenue to be considered. The passage of BACPA also set in motion what has been called a means tens that looks at borrower activity beyond simply their income. This means tests involves a litany of questions which seek to discover the actual expenses of the household in question based upon previously set criteria as assessed by the Internal Revenue Service which shall determine whether or not the borrowers could potentially pay back a set amount of money (proportional to the amount of income and size of household) each month to the creditors. Essentially, this means test and the artificially low expenses assigned by the IRS attempts to prove that the Alaska borrowers could actually pay back their lenders in a matter of only a few years – regardless of the true situation or those expenses not elaborated upon by the federal government guidelines – so that they will have no choice but to enter the Chapter 13 program.
Although, once again, there was minimal media attention paid to the BAPCA alterations at the time, the effect was still profound as regards the actual borrowers the bankruptcy protection laws were originally supposed to aid. The year following BAPCA, the number of borrowers filing for bankruptcy in Alaska dipped from over two thousand to just over five hundred. That’s almost a seventy five percent drop in the number of bankruptcy filings, and, no matter how good things had been, much of the decline had to be directly related to the legislation. No matter how tempting the notion of debt elimination may seem, the realities are rather different, and this is one of the reasons that Alaska borrowers have opted instead for solutions such as debt settlement to deal with their overarching credit card bills. Unfortunately, bankruptcy just isn’t that desirable an alternative as things currently stand. For Alaskan debtors who already have troubles paying the minimums amounts of their bills, the charges that inevitably accompany bankruptcy declaration can be more than they can pay. There are fees simply to file the petition, with actual amounts that depend upon the type of bankruptcy chosen, which are unable to be waived despite the borrowers’ demonstrable hardships (although, under highly selective circumstances, an installment plan for a handful of months may be worked out with the trustee), and the borrower will also be forced to enter a consumer credit course before declaration and after discharge regardless, once again, of their ability to pay. These fees – and the time spent working upon the bankruptcy filing – can seem disastrous to already cash strapped borrowers and that is even before we mention the potentially immense charges requested by attorneys working within the Alaskan bankruptcy system.
The amount of paperwork necessary for a bankruptcy in any state can’t really be overestimated, and Alaskans planning to undertake such procedures should be prepared to devote weeks of their life purely to arranging the specifics of their financial information. Moreover, they should make sure to dot every i and cross every t when it comes to filling out the bankruptcy forms. With the ever changing laws and statutes affected by federal government legislation as well as the Alaska state alterations, the paperwork grows larger every month and debtors are asked to provide more and more data from further and further back about their earnings, their secured and unsecured debts, and their possessions – even objects that you figure could not possibly be thought to be assets may be considered important by the courts. Easy enough to have one bonus check or minor obligation or forgotten piece of stock left from a relative slip your mind, but, once you understand the potential criminal penalties for fraud (and a lack of attention or laziness will be deemed exactly the same as conscious malfeasance by the court trustee), you’ll realize how very serious even the most seemingly pointless form should be treated. This is yet another reason why every Alaska borrower interested in Chapter 7 or Chapter 13 should make sure to search out and hire a trustworthy and competent attorney well versed in all of the arcane lore of Alaskan bankruptcy protection.
Alaskan borrowers do not have to employ the services of a lawyer simply to file bankruptcy, of course, but to declare Chapter 7 pro se (a Latin term meaning to enter legal proceedings without benefit of attorney counsel) will be far harder for the debtors involved. Nevertheless, for borrowers unable or still unwilling to take advantage of attorney assistance, this can be done without the aid of bankruptcy lawyers. The necessary forms are available from most bookstores, even from some legal stationery stores if you can find one in your area, but most people just visit their local county Clerk’s office and spend the negligible cost to buy the forms (you’ll have to use cash or money orders as checks are not viewed as viable currency). Also, for a similar charge, the forms can be downloaded and printed from one of the official websites. After the paperwork has been diligently filled out, you’ll need to visit one of the Alaska bankruptcy court’s divisional offices in Anchorage, Ketchikan, Nome, Juneau, and Fairbanks or mail the completed forms to the main Alaskan court in Anchorage (605 W 4th Ave, Anchorage, AK 99501) alongside the money order. For those Alaska borrowers who have special circumstances that require emergency filings, there’s a potential for having their arguments heard by contacting the Alaska court clerk at (907) 271-2655.
When we speak of paperwork, obviously, this greatly depends upon the type of bankruptcy that you have selected. Chapter 7 bankruptcies require (alongside a set of copies) the original petition, all statements and schedules, and a complete creditor matrix; it’s considered advantageous to bring along another copy of the documents with will be then stamped with confirmation by the Alaska court clerk (or mail an extra copy along with a self addressed envelope alongside sufficient postage). This creditor matrix we mentioned may need a little more explanation. The creditor matrix compiles the identity and addresses of each lender (and any additional interested parties such as collection agencies) so that the bankruptcy court can contact each one of them about the impending bankruptcy protection. This is one of the most important aspects of preparing for bankruptcy because, clearly enough, if you do not list the creditors within the court paperwork or you do not provide a correct current address for the creditor, these debts will not be eliminated after discharge, and, if you do not mention them and do not enlist the help of an attorney, do not expect the Alaska court clerks to search out anything that you may have missed – as ever, do not explain the government officials to do any more than they have to do.
As your authors have attempted to explain, the difficulties now attached to bankruptcy declaration virtually necessitate the assistance of a trained professional. Even beyond the complexities inherent with preparation of the forms required, the advice of lawyers experienced in Alaska bankruptcy proceedings should be considered integral to the success of the enterprise. Figuring out the exemptions allowable for personal property can itself be a life’s work – especially since the exemptions granted under Alaska law are vastly different than those offered by the federal government – and, for borrowers that want to make sure they have done everything they could to guarantee the safety of their possessions and assets, they cannot be too careful nor dare going about the process of filing alone. Furthermore, while most borrowers already know that some debts (mortgages, student loans, tax liens, child support or other familial obligations) are more difficult to discharge than credit card bills or similar revolving unsecured accounts, there are several forms of debt that fall into more grey areas less easily explained through articles such as this.
Once again, for individual consumers in Alaska and their families who intend to declare bankruptcy, they will have the option (though, depending upon their income, the courts may decide for them) of Chapter 7 debt liquidation or Chapter 13 debt re-organization. Under Chapter 7, though the estate and all applicable assets of the initial borrower will be subject to seizure with all proceeds turned over to the assembled creditors, most of the unsecured debts will be eliminated upon bankruptcy discharge. Chapter 13, however, leaves these debts to be repaid by the borrower under a system of payment overseen by the trustee who will work out a budget according to the aforementioned IRS guidelines. Much depends upon not only what the government views as proper expenses for Alaskan consumers but also what the courts believe to be future incomes for the household. As you may imagine, this is a highly risky proposition – to put your entire family’s financial well being in the hands of a stranger working under such constraints – but, under the current legislation, you may not have any alternative depending upon your income as relative to that of most Alaskans.
Although we have thus far spent the piece talking about the various drawbacks that Chapter 7 and Chapter 13 bankruptcies represent, we do understand the pressures that may draw Alaskan borrowers to consider the programs. Faced with non-stop pressure from bill collectors threatening to garnish accounts or perhaps even alert the authorities to unpaid obligations, previously law abiding and responsible consumers may search out any potential solution for an end to such harassment. Days after you have filed the necessary paperwork declaring bankruptcy, the appropriate Clerk’s Office for your county of Alaska will mail off official notification of the bankruptcy declaration to each of the lenders that you had previously mentioned within the forms. Even if they delay reading the notes for as long as legally possible, within the week the creditors will be forced to acknowledge they no longer have any right to continue calling to collect the debts. More to the point, once the petition has been filed with the Clerk’s Office, you are free to tell the collection agent that you have declared bankruptcy and their official assurances shall soon arrive. After all of the bankruptcy paperwork has been filed, lenders are no longer allowed to even contact the borrower without filing their own (incredibly rare) motions. This feature of bankruptcy is known as an automatic stay, and the near instantaneous halt to collector aggression can be a powerful lure to Alaskan consumers thinking about bankruptcy protection.
Nevertheless, as attractive as the dream of complete debt elimination may be, the drawbacks are just too large to be ignored. Even though a successful Chapter 7 bankruptcy will be discharge in about four to five months following the initial declaration (and potentially far longer if the bankruptcy is contested by one or more of the creditors), the ruinous effects upon credit reports last far longer. Much as the specific lengths and effects depends upon the three credit bureaus (Equifax, TransUnion, and Experian) as well as the ineffable computations of the FICO scoring system, Alaska borrowers should expect the bankruptcy to remain on their credit rating for seven to ten years. The Alaska bankruptcy court itself cannot influence this process, and, even if things seem unfair given your specific situation, there’s virtually nothing you can do to force the credit bureaus to examine or re-assess your particular credit report. This notation of bankruptcy can negatively affect borrowers through attempts to regain credit, efforts to buy homes, and it may even harm their hopes of future employment opportunities. This is a very serious consequence that can have untold repercussions on any Alaska debtor’s financial future and should be taken very seriously before any final decisions are made.
In Alaska, given our state’s rather different methods of employment for much of our citizenry compared to the rest of America, we recognize that bills can too quickly spiral out of control. For one, there are the specific problems of military service (the United States military is one of Alaska’s major employers, remember) because active member of the military have only one or two months of unpaid bills before the creditors will call the appropriate commanding officers and force repayment of have the serviceman discharged. Also, since so many Alaskans depend upon seasonal work (whether fishermen or construction workers) and suffer the volatile nature of economic whims more than most, a sudden drop of income can render even the most seemingly secure households suddenly at risk. This uncertain employment status combined with insufficient or absent health insurance leaves many Alaskans uniquely sensitive to health emergencies. We certainly do not suggest that you merely avoid the problem of growing bills, but you should be aware of the other solutions that have grown increasingly popular. In Alaska, the
debt settlement alternative does not promise to get rid of all of your unsecured debts, but a successful negotiation can suddenly reduce the credit card debts by as much as fifty percent with minimal costs to the consumer. Furthermore, through the payment schedule and budgetary system the debt settlement professional shall suggest for your family, all of these debts can be paid off within sixty months. It’s still a new sort of business and not every part of Alaska may have debt settlement storefronts as of yet, but, for every Alaskan borrower growing nervous about the negative consequences of bankruptcy protection, it’s probably worth the time to have a free initial consultation with one of the many experience on-line counselors to see if the debt settlement program would be right for you.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
