Legislature(1993 - 1994)
04/02/1993 02:00 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
SENATOR TAYLOR presented SB 158 (REDUCING EXEMPTION AMOUNTS) introduced by the Senate Judiciary Committee and asked his Aide, JOE AMBROSE, to review the bill. MR. AMBROSE - "Senate Bill 158 revises Title 38, the Alaska Exemption Act, the statute establishes the dollar amounts of homestead, personal property, wages, and liquid assets that are exempt from attachment, garnishment, execution, and foreclosure by creditors. SB 158 lowers the exemptions in current law and will enhance the ability of our business community to collect outstanding debt. Last October, the exemption amounts increased significantly as the Department of Labor recalculated the allowances, using a complicated formula provided in AS 09.38.115. You have in your packets a draft committee substitute which would repeal this section as recommended by the Department of Labor. This is a brief overview of SB 158. STEVE PHILLIPS, representing the Alaska Collectors Association is here this afternoon to give you a more detailed explanation of the legislation." SENATOR LITTLE - "Thank you, Mr. Chairman. What section was it that was being repealed in the substitute." MR. AMBROSE - "The only change in the committee substitute is on page 3, line 9, which repeals AS 09.38.115(b)." SENATOR TAYLOR next called on STEVE PHILLIPS. MR. PHILLIPS from the Alaska Collectors Association - "Basically, what we are trying to accomplish here is fairness to the business community, to the people of Alaska. It has become obvious that when you are two and a half times the minimum of any other state in the union higher, there is a problem here. You have to make, basically, almost $2000 a month at this point in time, to have your wages garnished. Small claims is normally the last avenue that is available to you. You try to work with people to take care of the debt prior to going that far. The way the state law is set up at this point in time, we're not able to recoup most of our attorney fees, legal costs, court costs, etc. so when we go to court, its strictly a last ditch effort to collect the dollars and cents we are trying to collect. You're still going to be at a point where you are going to have to be making almost $1400 per month to have your wages garnished, so it's still a pretty substantial amount." Number 104 SENATOR LITTLE - "Does this bill specify how many members are in the family? $2000 a month might be a lot for a single individual, but if you are caring for a family of four people, that's barely scraping by. Is there anything that would address that eventuality." MR. PHILLIPS - "Well, it is not actually on the number of those within the family, but .... if there is a sole income for a household, the exemption is much higher." SENATOR LITTLE - "Is that specified here in the bill?" MR. PHILLIPS - "Yes, it is. It is in existing statute and that will not be changed." SENATOR LITTLE - "Do you happen to know the number of the existing statute?" SENATOR JACKO - "Do you know what the average income is in the State of Alaska?" MR. PHILLIPS - "Thirty two thousand six something." SENATOR JACKO - "What is that per month?" MR. PHILLIPS - "In the neighborhood of $2,700 per month." SENATOR JACKO - "Is the primary focus on low income people?" MR. PHILLIPS - "It could. The bottom line is .... we have a credit grantor lending money to a person, or a person buying a product, and what we are doing, the way the law is set up now, we have made them debtor proof. They don't have to pay their debts, and they know it, and it's something that is being used." Number 140 SENATOR JACKO - "Do they take that into consideration when they are loaning them the money?" MR; PHILLIPS - "They should, but when you sign a contract to pay back a debt, most people are going to take that on good faith. You're signing a contract, and when they fail to pay it back, then it ends up with us." SENATOR LITTLE - "I see a lot of arguments - in the cost of a home here in Alaska, and in many more rural areas in Alaska, it is much, much higher than in the State of Washington or Oregon, just because of transportation costs. I think there is justification to have home exemptions, and even personal property exemptions that are higher than the other states that have been laid out here before us. Is there a reason why the level that has been chosen, for instance for a home, at $36,000, is about the same as in Washington? I have never heard of someone buying a home for $36,000 in the state." MR. PHILLIPS - "I think we're missing the point here. This isn't buying a home. (SENATOR LITTLE said she understood that.) This is the equity. Under state law, it doesn't matter if they have zero equity in the home, the way it stands right now, we have to pay them $64,000 to be able to take the home, plus the first deed of trust. So, .... folks can have X amount of dollars in a home, we can't recoup the money, the way it stands right now. But again, in the six years that I've been in business, we have foreclosed on one home, and it was paid off prior to ever going to foreclosure." Number 190 SENATOR LITTLE - "Explain that to me again. You said you had to pay them." MR. PHILLIPS - "Under state statute, when the new law went into effect in October, it went to $63,000 some odd dollars. That has to be paid to them up front. (SENATOR LITTLE asked to whom.) To the owner of the house .... The personal exemption for that home is paid to them. Then you have to pay to whoever holds the first deed of trust. If these people have zero in the bank, or zero equity in the home, they just made $63,000, and the collection agency has to pay the first deed of trust." SENATOR LITTLE - "But then the person is responsible to the bank?" MR. PHILLIPS - "No ma'am, we are responsible. We have to pay the first deed of trust, also, the way the law is set up." SENATOR TAYLOR suggested MR. PHILLIPS explain further - "You have to take judgement against the individual. After having taken judgement, then to collect on the judgement you have to hire a trooper to execute. Once you have executed, you have to take some asset, or property, to pay the judgement. Let's assume that they have a house as SENATOR LITTLE is asking about. You've not found a bank account, not found any income sufficient to pay the judge. Explain to SENATOR LITTLE what is involved in the taking of a house on a writ of execution." MR. PHILLIPS - "Under Alaska state law, which I think is a good part of the law, if we were going to attach a home, we would go to the court system and ask for a writ to attach the home. The judge will look at the case and what we have tried to do. Once we have tried to go after real property, and could not, we would send the writ to court, the judge would look at it to make sure we have met all of the criteria. He (the judge) would sign it and say, "OK, you cannot dispose of this property for 30 days." At that point in time, we send a trooper, or process server, to serve them. Then, it is posted the next four months in the newspaper, the post office, and the court system, that there will be a lien sale of this home on a certain date. They have that time, plus the next year after the lien sale, to reclaim the house. .... You can't just walk in and take someone out of their home. It's a very long drawn out process. In six year of business, we have foreclosed on one home, and before we got to the final process, the people did recoup their home." SENATOR LITTLE - "So this bill would allow you to pay less to the individual whose home has been foreclosed upon?" Number 228 MR. PHILLIPS - "Yes ma'am, it will take it to $36,000, which is 20% higher than Washington or Oregon." SENATOR LITTLE - "Well, having built a house in Alaska, I would think that it's a 20% greater cost in building a house here, but I understand your point. Thank you." SENATOR TAYLOR - "Would you please explain to the committee the difficulty you encountered in executing upon a state employee, with deferred compensation available as a dodge." MR. PHILLIPS - "We have a young lady that works for the State of Alaska. She wrote 42 NSF checks within the City of Juneau. We tried to collect it by dealing directly with her. She refused to deal with us. We reduced it to judgement by taking it to court for a court awarded judgement. She had a chance to show up in court to defend her side. In this particular one, she did show. The court awarded the judgement against her, and we went to attach her wages, and at the point in time, it was $350 per week with the net due to them, which is an exemption right. She raised her retirement program to drop hers to $350 per week, so basically, we zeroed out. This is the kind of things we are running up against now. She makes very good money, but she can go out and write 42 checks and get away with it, because the way the law (is written). SENATOR HALFORD - "Isn't there any criminal prosecution available?" MR. PHILLIPS - "The police won't do that ... SENATOR HALFORD - "Can't you do anything to prosecute the theft?" MR. PHILLIPS - "It is federal offices, we cannot under the (unintelligible) Act, we cannot, under any circumstances, involve the police department or any other civil, we always use civil, can't go criminal." SENATOR HALFORD - "If somebody got a bad check, can they do anything criminally?" MR. PHILLIPS - "Yes, we can. In the City of Ketchikan, a husband and wife came through year before last, dumped $40,000 in bad checks in four days on three bank accounts. They went to the State of Washington. We tracked them down, brought them to the DA, and they (the DA) said they were too busy. The police department in Ketchikan will not handle them now because of that. SENATOR TAYLOR - "I think you will find its the same here in Juneau, isn't it? (MR. PHILLIPS said it was so.) You can take 30 NSF checks in on somebody who has bounced them all over town, and all they say is that it is a civil matter. Take it to court. You take it to court, and right now they have $450 of net take home exemption per pay period, and you cannot execute on them." SENATOR HALFORD - "Bankruptcy exemption is a different issue from intentional theft by pen v. theft by gun." SENATOR TAYLOR - "It may be, SENATOR HALFORD, but it works out the same way if you are in business. You will not get a police officer to help you." MR. PHILLIPS - "We are averaging 1600 checks a month in the City of Juneau that we are processing in the collection agency here. Ketchikan went down to about 300. SENATOR TAYLOR asked for any more questions and whether MR. AMBROSE had the citation requested by SENATOR LITTLE. Number 278 MR. AMBROSE - "Senator, I do not have. There is a formula, and I can't find it. I'll check with legal and get the exact citation. There is a formula showing, there is a scale based on whether it is an individual, head of household. That sort of thing." SENATOR TAYLOR invited DAVID TEAL, Director of Administrative Services for the Department of Labor, to testify. MR. TEAL - ".... Our involvement in this is limited to the automatic adjustment, which occurs in Section 115, and our position was that we had some technical problems because of amendments made in 1987. In going through the public notice process, we had some complaints from the public that the notice doesn't go to the correct people, the people that are interested. People who read labor regs tend to be those people who are interested in wage and hour, public safety, and health issues as opposed to finance issues, so that the people that probably needed to know, didn't get the proper public notice. The third issue was the changing of statute via regulations, and of course, that is up to the legislature to decide that one. Given that the section is being repealed, the problems for us would go away." MR. AMBROSE to SENATOR LITTLE - "If you will look at page 3, line 1, in either the committee substitute or the original bill, '(b) The exemption amounts under AS 09.38.030 may be increased when the individual submits an affidavit, under penalty of perjury, stating that the individual's earnings alone support the individual's household;'" SENATOR LITTLE - "And then I also found the section that is being repealed." SENATOR TAYLOR entertained a motion to adopt the committee substitute. SENATOR DONLEY asked for the difference in the committee substitute. SENATOR TAYLOR explained the only modification was on page 3, line 9, "Sec. 7. AS 09.38.115(b)" and the department had testified in favor of the change. SENATOR HALFORD - "So we're taking the exemption from $64,000 down to $36,000 with no cost of living escalator." SENATOR DONLEY moved to adopt CS FOR SENATE BILL NO. 158(JUD). Without objections, so ordered. SENATOR DONLEY moved, on the committee substitute, to delete, on page 1, lines 7 and 13, the $36,000 number, and leave the $54,000 in place. SENATOR TAYLOR reviewed the changes, and objected for purposes of discussion. Number 354 SENATOR DONLEY - "I think people have traditionally felt pretty strong about the homestead exemption. It allows people to maintain a home of reasonable value. I have been concerned about the escalator clause in there also, and I support the repeal of that, but it might be going too far to repeal that and also drop the homestead exemption. This is kind of a middle ground to repeal the escalator clause and leave the homestead exemption where it is, but still maintain these reductions back down to more appropriate levels for the individual exemptions ...." SENATOR TAYLOR withdrew his objection, and the amendment was adopted. SENATOR HALFORD - "We have gone back down from $64,000 to $54,000 because it really means $64,000 today, because it was in 1963 dollars." SENATOR DONLEY - "To clarify that, the new statutory amount would actually be $54,000, and it wouldn't be modified ...." SENATOR HALFORD moved to pass CS FOR SENATE BILL NO. 158(JUD) from committee with individual recommendations. The bill passed on a 3-2 vote.
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