Wyoming Bankruptcy Exemptions and Law
If you have been overwhelmed by your debt and fear you can never pay it off, filing for bankruptcy could provide the help you need to get back on your feet financially. Bankruptcy offers a lifeline to those who are drowning in debt by providing them with protection from creditors and bill collectors while they either pay down or eliminate their debts. Wyoming has also implemented its own rules on bankruptcy that could provide you with additional protection from creditors.
Wyoming Bankruptcy Law
The U.S. Bankruptcy Courts are unusual in that, while they are federal courts, they allow states to decide what property their residents can keep in bankruptcy. Wyoming is one of the states that has chosen to establish its own rules on property that is exempt from the bankruptcy process so you can use it to continue with your life after bankruptcy.
Some states will give you the option of choosing between the federal bankruptcy exemptions provided for in the U.S. Bankruptcy Code and their state exemptions, but Wyoming does not. In Wyoming, you must use the state exemptions, even if the federal exemptions would allow you to protect more of your property. More on these exemptions below. First, it's important for you to understand how bankruptcy works.
When you file for personal bankruptcy, you will need to choose between filing under Chapter 7 and Chapter 13. Both types of bankruptcy will help you get out of debt, but each will resolve your debt problems differently. This means the chapter you choose will have a major impact on what property you can keep during bankruptcy.
Chapter 7 bankruptcy is what most people think of when you mention bankruptcy. It is a “liquidation bankruptcy" where the bankruptcy trustee can take all of the property you can't protect with an exemption and sell it to repay your creditors. In return for giving up your non-exempt property, you will exit Chapter 7 nearly debt-free. Since most creditors receive only a fraction of what they are owed in a Chapter 7 case, there are strict rules to keep those who could otherwise pay their debts from filing under this chapter.
Chapter 13 bankruptcy is a “reorganization" bankruptcy that lets people who have a steady income restructure most of their debts so they are paid off in three to five years. The payments are made under a repayment plan approved by the court and the plan can force some creditors to take less than they are owed. Homeowners often choose Chapter 13 over Chapter 7 because they will usually keep their homes.
The Automatic Stay Provides Protection from Creditors
The automatic stay issued by the court when you file for bankruptcy is a powerful tool that protects you from creditors while you resolve your debt problems through the bankruptcy process. The stay is issued regardless of whether you file under Chapter 7 or 13 and prohibits creditors from taking action to collect debts you owe, including harassing phone calls, mortgage foreclosures, and efforts to garnish your wages.
The stay will give you the breathing room necessary to take stock of your financial situation and determine how best to proceed with your bankruptcy. If a creditor violates the stay by contacting you or taking any other action, the court may force the creditor to pay damages, including attorneys' fees.
Secured vs. Unsecured Debt
Not all debt is treated the same in bankruptcy so it helps to know which kind of debt you have and how much. As a general rule, nearly all of your debt will be split between secured and unsecured obligations. How your debt is classified is often an important factor in whether you choose to file under Chapter 7 or 13.
Unsecured debt describes a situation where you owe money to a creditor, but the creditor has no right to repossess your property if you fail to pay. Nearly everyone who files for bankruptcy has at least some unsecured debt, which is usually credit card debt, unpaid court judgments, or unpaid medical bills.
You have secured debt when a creditor has the right to repossess your property if you fail to repay them. This type of debt is often the result of a loan transaction where you put up some of your property as collateral for the loan, most often the property the loan was used to purchase. Common types of secured debts in personal bankruptcies are home mortgages and car loans.
How Is Secured and Unsecured Debt Treated in Bankruptcy?
Filing for Chapter 7 bankruptcy can often discharge almost all of your unsecured debt. But some unsecured debt, like unpaid child and spousal support, cannot be eliminated.
Secured creditors are in a better position to get repaid and you will need to pursue one of three options with regard to your secured debts:
- Return the collateral to the creditor. You will lose the property, but you are usually free from making any additional payments on the debt.
- Keep the property and continue making payments. If a Wyoming exemption covers your equity in the item, you may be able to work out a payment arrangement with your creditor.
- Purchase the property by paying off the loan balance. This is rare in Chapter 7 cases because those filing under that chapter almost always lack the assets to do so.
If you file under Chapter 13, you can often keep most of the property that is subject to a secured debt when you submit a payment plan to repay the debt over three to five years. If the court approves the plan, you can use it to force your secured creditors to restructure your debt and even forgive some of what you owe. Your home mortgage will not be included in the plan and you must continue making payments outside of bankruptcy if you want to keep your home.
Unsecured creditors will almost always receive more in a Chapter 13 bankruptcy than they would in a Chapter 7 case. But they are still likely to receive less than they are owed. This is because the plan repays those creditors with whatever disposable income you have left after paying your secured creditors and all unpaid unsecured debt is discharged.
Not everyone in financial trouble can file for Chapter 7 bankruptcy. You must first show that your income is low enough to qualify. This is usually done using one of two means tests.
Under the first means test, you will only need to show that your household income is less than Wyoming's median income for households of the same size. For example, U.S. Census data says that in November 2020, the average income for a three-person Wyoming household was $83,878. If your household earns less than $83,878 annually, you qualify to file under Chapter 7.
Even if your household income is above the Wyoming median you may still qualify if you can show the court you have little to no income left over after you pay your bills.
There is no income limit for filing under Chapter 13, but it is possible to have too much debt. Chapter 13 is only available to people who have less than $419,275 in unsecured debt and less than $1.26 million in secured debt.
If you file for bankruptcy in Wyoming, you must use the exemptions provided under state law. If you have property that falls under one of the exemptions, you will be allowed to protect it from creditors in a Chapter 7 case and use it to start over after you finish with bankruptcy.
Married couples who file for bankruptcy together are each allowed to claim a full exemption if both spouses own the property together. This effectively doubles the size of the exemption for most couples.
Wyoming 's homestead exemption will let you keep up to $20,000 of the equity you have in your home. Married couples can exempt up to $40,000 of their equity.
The homestead exemption applies to any real property in which you currently reside, including a house, mobile home, or house trailer.
You can keep up to 75% of your disposable weekly earnings or 30 times the federal minimum wage, whichever is higher. The wages earned by members of the National Guard are entirely exempt. Finally, the wages of inmates, including those on work release, are exempt.
Motor Vehicle Exemption
Wyoming lets you exempt up to $5,000 of the equity you have in a motor vehicle.
No Wildcard Exemption
While many states have implemented a “wildcard" exemption that allows someone filing for bankruptcy to apply an exemption to any of their property, Wyoming has not.
Personal Property Exemptions
The following personal property is exempt in Wyoming:
- Up to $4,000 in furniture, household items, bedding, and food
- Up to $2,000 in necessary clothing and wedding rings
- Up to $3,000 in firearms and 1,000 rounds of ammunition
- A bible, schoolbooks, and pictures
- A burial plot and prepaid funeral contracts
Tools of the Trade Exemption
You can exempt up to $4,000 of tools, instruments, books, or stock used in your trade, business, or profession.
Insurance Benefits Exemption
Wyoming offers an exemption for most life insurance benefits and some annuity benefits, including:
- Individual life insurance policy proceeds
- Life insurance proceeds held by an insurer, but only if the policy contains a clause prohibiting creditor payments
- Group life or disability policy or proceeds
- Annuity contract proceeds of up to $350 per month
- Fraternal benefit society benefits
Pension and Retirement Exemption
The following retirement and pension benefits are exempt:
- Tax-exempt retirement accounts such as 401(k)s, IRAs, and defined benefit plans
- Public employee plans, including game and fish warden plans
- Firefighter and police officer plans
- Highway officer and criminal investigator plans
Public Benefit Exemptions
Most public benefits are exempt in Wyoming, including:
- Social Security
- Unemployment compensation
- Workers' compensation
- General assistance
- Crime victims' compensation
- Liquor licenses and malt beverage permits are exempt
How Do I Start Bankruptcy in Wyoming?
Everyone who files for bankruptcy must finish a credit counseling course within 180 days of filing their petition. The course should help you decide whether bankruptcy really is your best option. If you are filing under Chapter 13, you are often required to draft a repayment plan to submit to the court as part of the course.
When you file for bankruptcy using an attorney, the attorney will usually take care of the filing process for you. But if you are filing on your own (known as a “pro se" filing), you will begin the process by downloading the correct forms for Wyoming's bankruptcy court. Depending on your financial situation and the type of bankruptcy you choose, you will likely need to file additional documents described in the instructions.
It costs the same to file for bankruptcy whether you are filing pro se or with an attorney. The Chapter 7 filing fee is $338 and the Chapter 13 fee is $313. If you cannot pay the fee, you can ask the court to pay in installments over 120 days. The court may also waive the fee if you earn less than 150% of the poverty line.
Bankruptcy can be a complex and intimidating process and most filers choose to be represented by an attorney. Unfortunately, it is hard to give “typical" prices for the fees charged by Wyoming bankruptcy lawyers because they will vary widely depending on where you live and the complexity of your case. Most attorneys will charge between $650 and $1,200 for a simple Chapter 7 case, but they usually charge more for Chapter 13 cases.
Need Help Filing for Bankruptcy in Wyoming?
If you are considering bankruptcy your first step should be to consult an experienced local attorney. Most attorneys offer free consultations and can offer guidance as to whether bankruptcy really is your best option. An attorney can also guide you through the filing process, represent you in court, and negotiate with your creditors.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
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