What Are the Nebraska Bankruptcy Exemptions?

What Are Bankruptcy Exemptions?

Bankruptcy exemptions are laws that help you protect your personal property when you file bankruptcy. Most people who file Chapter 7 get to keep all their property, but you must claim exemptions on your bankruptcy paperwork to do so. Essentially, using the right exemptions helps you hold onto the stuff you need to maintain a basic standard of living.

In rare cases, if you have expensive property that’s not covered by an exemption, the bankruptcy trustee can sell it and distribute the proceeds equally among your creditors. 

Can You Use Federal Bankruptcy Exemptions if You Live in Nebraska?

If you’ve lived in Nebraska for at least the last two years and you’re filing for bankruptcy, you have to use the Nebraska state exemptions. You can supplement those with federal non-bankruptcy exemptions, which often help people protect certain money benefits like retirement accounts.

Every state has its own set of bankruptcy exemptions under state laws. There are also federal bankruptcy exemptions, which can be found in the U.S. Bankruptcy Code. Some states allow their residents to choose between the state and federal exemptions, but Nebraska doesn’t.

If you haven’t lived in Nebraska for at least two years when you go to file your bankruptcy case, you’ll need to figure out which set of exemptions apply to you. You can learn more about that by reading Can I File For Bankruptcy After Moving To A New State?

Understanding Nebraska’s Bankruptcy Exemptions

Nebraska’s exemptions are broken down into three basic categories:

• Real property, including your home and/or land you may own

• Personal property, including a range of items from household goods to your car

• Money benefits, including wages, retirement accounts, and other benefits

Let’s explore the exemptions for each category.

Real Property: The Nebraska Homestead Exemption

Nebraska offers a very generous homestead exemption that protects up to $60,000 of equity in your home and the land it sits on. The law outlines some limitations on the size of the land associated with the home. It can’t exceed two lots in a city or village. Or, if you live outside of a city or village, the land must be 160 or fewer acres. The Nebraska homestead exemption can also be used to protect the proceeds from the sale of your home — up to $60,000 — for six months after the sale. 

Source: Neb. Rev. Stat. §§ 40-113, 40-116

Nebraska’s Personal Property Exemptions

Personal property covers a lot of different kinds of things you may own, from your car to furniture in your home and beyond. 

Motor Vehicle Exemption

Most bankruptcy filers are worried about losing their car when they file their case. You can use the motor vehicle exemption to protect your car.

The motor vehicle exemption in Nebraska is $5,000 for one vehicle. This means you can protect up to $5,000 worth of equity in your car. Remember, equity is calculated by subtracting what you owe on the car from the car’s current market value. 

Source: Neb. Rev. Stat. § 25-1556(1)(e)

Other Personal Property Exemptions in Nebraska

State exemptions address household goods and tools of the trade up to a specific, combined amount.

A Nebraska filer can protect up to $3,000 of furniture and household goods. This includes household computers, appliances, books, or musical instruments which are held primarily for personal, family, or household use.

You can also protect up to $5,000 for tools of the trade. These are tools and implements used in your trade or profession. Note that you can’t use this exemption on a motor vehicle, even if it’s used for your employment.

Source: Neb. Rev. Stat. §§ 25-1556(1)(c), 25-1556(1)(d)

The following personal property is fully exempt:

• Health aids, if professionally prescribed (protected for both the debtor and any dependents)

• Burial plots, crypts, lots, tombs, niches, or vaults 

• Clothing and immediate personal possessions*

*While “immediate personal possessions” aren’t 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.

Source: Neb. Rev. Stat. §§ 25-1556(1)(f), 12-506, 12-517, 12-520, 12-506, 12-605

Nebraska’s Wildcard Exemption

Nebraska also offers a wildcard exemption that allows filers to protect any personal property of their choice up to a value of $5,000. There’s an important limitation here though: The law doesn’t allow for bankruptcy filers to use the wildcard exemption to protect real estate or wages. This means you can’t add the $5,000 wildcard exemption, for example, to the homestead exemption to increase how much of your home’s equity is protected.

Source: Neb. Rev. Stat. § 25-1552

Money Benefits

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

• Wages, protected up to 30 times the federal minimum wage or 75% of earned but unpaid earnings. If the bankruptcy filer is the head of household, that percentage increases to 85% of unpaid wages. Additionally, a judge can approve more for low-income debtors. 

• Life insurance or annuity proceeds, protected up to $100,000 of the loan value

• Fraternal benefits society, protected up to a $10,000 loan value

Source: Neb. Rev. Stat. §§ 25-1558, 44-371, 44-1089

Public Benefits

The following public benefits and pension accounts are fully protected:

• Workers’ compensation benefits

• Aid to the blind, aged, disabled, and public assistance

• Earned income tax credit

• Unemployment compensation

• General assistance to the poor

• County employees’ retirement benefits

• Military disability benefits, not exceeding $2,000

• ERISA-qualified benefits necessary for support, including IRAs

• School employees’ retirement benefits

• State employees’ retirement benefits

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

Source: Neb. Rev. Stat. §§ 48-149, 68-1013, 25-1553, 48-647, 68-148, 23-2322, 25-1559, 25-1563.01, 79-948, 84-1324

Need Help Filing Chapter 7 Bankruptcy in Nebraska? 

Since bankruptcy is a legal process, some aspects of it can feel overwhelming for the everyday person. Luckily, help is available! Upsolve has helped over 13,000 people file Chapter 7 bankruptcy without hiring a lawyer. You can take a quick screener to see if you’re eligible to use our free filing tool.

If you have specific questions about property you own and whether it’ll be protected in bankruptcy, you can set up a free consultation to speak with an experienced bankruptcy attorney near you.