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What are the Nebraska Bankruptcy Exemptions?

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In a Nutshell

Every state has its own set of bankruptcy exemptions under state laws. There is also a set of federal bankruptcy exemptions which can be found in the United States Bankruptcy Code. Some states allow their residents to choose between the state and federal exemptions. Nebraska, however, does not offer the choice to its residents. If you have lived in Nebraska for at least the last two years and you are filing for bankruptcy, you are limited to using the Nebraska state exemptions, but you can supplement those with any federal nonbankruptcy exemptions that apply. These additional exemptions are available whether or not you are in a bankruptcy case.

Written by Attorney Eva Bacevice.  
Updated July 28, 2020


What are the Nebraska bankruptcy exemptions and why are they important in a Chapter 7 bankruptcy? 

Chapter 7 bankruptcy allows you to walk away from some, or even all, of your unsecured debt so that you can get a fresh start financially. If you are considering filing Chapter 7 in Nebraska, one of the important concepts you’ll need to understand are bankruptcy exemptions. Bankruptcy exemptions are the laws that help to protect your personal property when you file bankruptcy. Knowing in advance what you can protect in a Chapter 7 bankruptcy can help to determine if filing bankruptcy is the right debt relief path for you.

The basic principle in any bankruptcy case is that you turn over your unprotected property to the bankruptcy estate, where your bankruptcy trustee can sell it and distribute the proceeds equally among your unsecured creditors. Of course, no one wants to have to turn over all of their property to get debt relief, and requiring that would be counterproductive to that goal of giving the filer a fresh start. Using the right exemptions can help you hold onto the stuff you need to maintain a basic standard of living. Essentially bankruptcy exists as a remedy to help people out of a bad financial situation, but this purpose needs to be balanced against fairness to their creditors. This is where the bankruptcy court may get involved in determining whether an exemption is proper, or if someone is trying to keep a luxury or unnecessary item at the expense of their creditors. Generally speaking, most Chapter 7 filers can protect all of their personal property with the proper use of exemptions. 

Does Nebraska allow the use of federal bankruptcy exemptions?

Every state has its own set of bankruptcy exemptions under state laws. There is also a set of federal bankruptcy exemptions which can be found in the United States Bankruptcy Code. Some states allow their residents to choose between the state and federal exemptions. Nebraska, however, does not offer the choice to its residents. If you have lived in Nebraska for at least the last two years and you are filing for bankruptcy, you are limited to using the Nebraska state exemptions, but you can supplement those with any federal nonbankruptcy exemptions that apply. These additional exemptions are available whether or not you are in a bankruptcy case. 

The only way that you might use a different set of exemptions is if you do not meet the residency requirement for Nebraska. If you haven’t lived there for at least two years, you don’t have the option to use Nebraska state exemptions. Instead, you’ll need to look back to the 180-day period before two years ago and use the exemptions from the state that you lived in for the majority of those 180 days. This can be confusing, so to clarify, you are looking back to where you lived two and a half years ago for that initial six month period. If the state you lived in before offers a choice between state and federal exemptions, you can choose which set to use

Real Property - the Nebraska Homestead Exemption

Nebraska offers a very generous homestead exemption that protects up to $60,000 of equity in your home. It is limited, however, to land that does not exceed two lots in a city or village or 160 or fewer acres outside of a city or village. The Nevada homestead exemption even applies to protect the proceeds from the sale of your home, up to that $60,000, for six months after the sale. Neb. Rev. Stat. §§ 40-113, 40-116

Personal Property Exemptions

Nebraska exemptions can be found in the Nebraska Revised Statutes, Chapters 12 and 25. You can protect your personal property up to the amount listed below:

Motor vehicle: Each filer can protect the equity in one car up to $5,000 per vehicle. So if you are a married couple filing jointly with two cars, each spouse can protect the equity in one vehicle. Neb. Rev. Stat. § 25-1556(1)(e).

Furniture and household goods: These items are further defined beyond household goods and furnishings to include household computers, household appliances, books, or musical instruments which are held primarily for personal, family, or household use. A Nebraska filer can protect up to $3,000 of combined value for the above-stated items. (Neb. Rev. Stat. §25-1556(1)(c))

Clothing and immediate personal possessions, or necessary wearing apparel are protected without limit. While “immediate personal possessions” are not specifically defined within the statute, this has historically been applied to exempt a filer’s wedding rings, and potentially jewelry received as a gift from a spouse or family member. 

Health aids, if professionally prescribed, are also fully protected for both the debtor and any dependents. §25-1556(1)(f)

Burial plots, crypts, lots, tombs, niches or vaults are also fully protected for Nebraska filers. Neb. Rev. Stat. §§ 12-506; 12-517, 12-520, 12-506, 12-605.

Tools of the trade - In Nebraska, you can protect up to $5,000 of tools and implements used in your trade or profession, but you can’t use the exemption on a motor vehicle. Neb. Rev. Stat. § 25-1556(1)(d)

Finally, Nebraska also offers a wildcard exemption that allows filers to protect any personal property (but specifically excludes real estate or wages) of their choice up to a value of $5,000. Neb. Rev. Stat. § 25-1552.

Money Benefits

Some of your money or benefits are considered entitlements, which means that they cannot be touched by creditors. In Nebraska these include the following:

Wages: Nebraska filers can protect up to 30 times the federal minimum wage or 75% of earned but unpaid earnings; 85% of unpaid wages for the head of household. Additionally, a judge can approve more for low-income debtors. Neb. Rev. Stat. § 25-1558

Insurancebenefits. Life insurance or annuity proceeds up to $100,000 of the loan value. Neb. Rev. Stat. § 44-371

Fraternal benefits society benefits are protected up to a $10,000 loan value. Neb. Rev. Stat. § 44-1089).

Other Nebraska Exemptions

There are provisions in Nebraska law beyond bankruptcy specific exemptions, that apply to protect you whether or not you happen to be in bankruptcy. The following public benefits and pension/retirement accounts are protected with no limit or to the amount stated:

Publicbenefits

  • Workers’ compensation benefits (Neb. Rev. Stat. § 48-149)

  • Aid to the blind, aged, disabled, and public assistance (Neb. Rev. Stat. § 68-1013) 

  • Earned income tax credit (Neb. Rev. Stat. § 25-1553) 

  • Unemployment compensation (Neb. Rev. Stat. § 48-647)

  • General assistance to the poor (Neb. Rev. Stat. § 68-148)

Pensions

  • County employees’ retirement benefits (Neb. Rev. Stat. § 23-2322)

  • Military disability benefits, not exceeding $2,000 (Neb. Rev. Stat. § 25-1559)

  • ERISA-qualified benefits necessary for support, including IRAs (Neb. Rev. Stat. § 25-1563.01) 

  • School employees’ retirement benefits (Neb. Rev. Stat. § 79-948)

  • State employees’ retirement benefits (Neb. Rev. Stat. § 84-1324)

Additionally, certain federal exemptions for retirement funds might also be available under 11 U.S.C. § 522(b)(3)(C). 

Filing Chapter 7 bankruptcy? 

You can always schedule a consultation with a Nebraska bankruptcy attorney to go over any concerns you have about protecting your property in a Nebraska bankruptcy. Most bankruptcy lawyers offer a free initial consultation so you can try it out with a full commitment. It can also be helpful to speak with a bankruptcy attorney to get their legal advice to confirm that Chapter 7 is the best choice for you in your current situation. Alternatively, it can be important to learn that Chapter 13 bankruptcy might be a better option, based on what property you want to keep. If you can’t afford to hire a bankruptcy attorney you can still move forward and file your own bankruptcy case. If you find yourself in that circumstance, be sure to check Upsolve’s screening tool to see if you’re a good fit to use our free web app throughout your bankruptcy process. 



Written By:

Attorney Eva Bacevice

LinkedIn

Eva G. Bacevice graduated from the University of Michigan Law School in 2001. She practiced law for close to a decade in the area of consumer bankruptcy. She now works in higher education as an Academic Advisor for undergraduate students at the Stephen M. Ross School of Business,... read more about Attorney Eva Bacevice

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