The Alaska motor vehicle exemption helps determine whether you can keep your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy. Here you’ll find information about the Alaska car exemption: how much it is, what types of vehicles it covers, how it works for married couples, how to find the applicable statute, and more.
(For more information about exemptions, including how they work and which ones you can use, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Bankruptcy area.)
The Motor Vehicle Exemption and Your Car
Alaska’s motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors. If the equity in your car is less than Alaska’s car exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
The Amount of Alaska’s Motor Vehicle Exemption
In Alaska, you can exempt up to $4,050 in equity in your car or other vehicle, as long as the market value of your vehicle is no more than $27,000.
Example. Sarah owns a 2008 Jeep Liberty. Her car is worth $18,000 and she owes the dealership $15,000, so she has $3,000 of equity in the car. If she files Chapter 7 bankruptcy in Alaska, she can protect all of the equity in her car using the motor vehicle exemption.
The Federal Motor Vehicle Exemption
Although Alaska law states that you can only use the state exemptions in bankruptcy, you are allowed to choose between the state exemptions or the federal bankruptcy exemptions, based on a Ninth Circuit court decision (In re McNutt 87 B.R. 84 (9th Cir. 1988). The federal motor vehicle exemption amount changes every three years. To find the current amount, see our article The Federal Bankruptcy Exemptions.
Using the Federal Wildcard Exemption to Protect Your Car
If the equity in your car is more than the motor vehicle exemption protects, you may be able to cover the extra equity by using a wildcard exemption. Alaska does not have a wildcard exemption, but if you choose to use the federal exemptions, you can use the federal wildcard exemption. This amount changes every three years. To find the current amount, see our article The Federal Bankruptcy Exemptions.
Example. Sarah has paid down her car loan, and only owes the dealership $10,000 on her $18,000 Jeep Liberty, leaving $8,000 of equity in her car. The Alaska motor vehicle exemption won’t fully protect this much equity, and she does not own a home, so she chooses to use the federal exemptions. She can use the federal motor vehicle exemption to protect $3,450 of equity, and the wildcard (including the unused homestead exemption) to protect the remaining $4,550 of equity, so her car will be fully protected in her Alaska Chapter 7 bankruptcy. (Check the federal bankruptcy exemptions for current amounts.)
Can Married Couples Double Alaska’s Motor Vehicle Exemption?
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. Married couples filing a bankruptcy together can double the Alaska motor vehicle exemption and protect up to $7,800 of equity in a motor vehicle.
(To learn about the advantages and disadvantages of joint bankruptcy filings, see Nolo's section on Bankruptcy Options for Married Couples).
What Vehicles and Insurance Are Covered by the Motor Vehicle Exemption?
The Alaska exemption allows you to protect one motor vehicle, such as a car, truck, or van. If your vehicle is lost, stolen, or damaged, Alaska law also allows you to protect the insurance proceeds (up to the amount of the vehicle exemption) for twelve months after you receive it, as long as the funds are traceable to the vehicle.
Checking Alaska’s Exemption Laws
You can find Alaska’s motor vehicle exemption at Alaska Stat. Section 9.38.020.
When the Alaska Exemption Amounts Are Updated
The exemption laws in Alaska change periodically, in accordance with the Consumer Price Index. The statutes on the Alaska Legislature website may not reflect the current amounts, but the current amounts are listed in Alaska Administrative Code (8 AAC 95.030), which you can find on the Alaska Legislature website at www.legis.state.ak.us.