The Wyoming legislature needs to change the homestead exemption to help protect its citizens that enter bankruptcy.
Bankruptcy exemptions are the state and federal laws that specify which type of property creditors are not entitled to take to satisfy a debt. Additionally, the bankruptcy trustee is not entitled to take exempt property and sell it for the benefit of the debtor's unsecured creditors. Generally, exempt property is the property that you get too keep during and after the bankruptcy. Your other property (nonexempt property) is the property that the trustee takes and sells to create the funds for you creditors. It is in a debtor's best interest to maximize their exempt property.
Maximizing your exemptions depends on state and federal considerations. Each state's legislature has a set of exemptions for use by its citizens. Additionally, Congress has created another set of federal exemptions. Some states (19) allow their citizens to choose between the state's exemptions and the federal exemptions. In those states the debtor can not cherry pick from either exemptions list, but rather the bankruptcy filer must choose to file bankruptcy using the state or the federal exemptions. Alternatively, a state like ours, Wyoming, has opted out of the federal exemptions altogether. This means that debtors filing bankruptcy in Wyoming do not get to choose between the federal and state exemptions. All filers in Wyoming must use the state exemptions. Many of our exemptions are significantly antiquated and it would behoove our legislature to revisit some of them. The most significant exemption is the homestead exemption which I argue needs to be updated to help protect Wyoming citizens during bankruptcy. Hopefully, the legislature will address some of these short comings in their special sessions because many Wyoming denizens will be relying on these exemptions in the coming years as the Covid-caused economic recession takes hold over the Wyoming economy.
The homestead exemption in Wyoming is found in Wyoming Statutes (W.S) §1-20-101;102;103;104. Essentially it states that a person may claim a $20,000.00 exemption in the equity of their home or trailer. That exemption can be claimed by the spouse or child of a deceased owner. Additionally, property held as tenancy by the entirety can be exempt against debts owed by only one spouse (In re Anselmi, 52 B.R. 479 D. Wy. 1985). If a couple is filing jointly they may double the $20,000.00 for a combined total of $40,000.00. If you are thinking that number seems low then you are correct. When you consider the average price of a home is roughly $256,000 in Wyoming or $864,000.00 in Teton County you realize that our state exemption is wildly antiquated and does not reflect economic reality.
In contrast, South Dakota along with five other states (Texas, Florida, Oklahoma, Kansas, and Iowa) allow for an unlimited exemption with some restrictions based on where the home is located like "up to 160 acres in a rural area" of Florida. In fact only nine states have a state homestead exemption that is less than Wyoming's $20,000.00 for a single filer and of those nine some of those states allow their citizens to use the federal exemption. The federal exemption, which Wyoming has opted out of allowing its citizens to choose, is roughly $25,000.00 and double for couples filing jointly. This puts Wyoming at a disadvantage to a large majority of the country that either has more gratuitous state homestead exemptions or filers are allowed to use the federal exemption which is better still than Wyoming's exemption.