How Extensive Are Nebraska’s Homestead Protections?
Can you keep your home and file for bankruptcy in Nebraska? Nebraska bankruptcy laws allow married debtors or the head of a household to protect $60,000 of home equity from the bankruptcy trustee. Home equity is calculated by subtracting the balance of any mortgage from the appraised value of your house. In Nebraska, the property to be exempted cannot exceed 2 lots in a city or village or 160 acres in more rural settings. Proceeds from the sale of real estate are exempt 6 months after the sale. Under Nebraska bankruptcy laws, a husband and wife filing a joint bankruptcy may not double the homestead exemption.
How does the Nebraska homestead exemption operate in the context of a chapter 7 bankruptcy case? First, it is important to understand that the homestead exemption is only concerned with equity. If you own your home outright, you have 100% home equity. If, on the other hand, you find yourself owing more than your home is worth, you have no equity and the trustee will have no interest in your home if you file for bankruptcy. Let’s say that you own a home in Lincoln, Nebraska worth $300,000 encumbered by a mortgage of $250,000. You have $50,000 of home equity. If you were to file for chapter 7 bankruptcy tomorrow, you would be able to shed burdensome debt and keep your home. Your $50,000 of home equity is beneath the $60,000 exemption limit set by the Nebraska legislature and is therefore exempt.
Be aware that exempting home equity does not relieve the obligation to pay your mortgage. If you fall behind on your mortgage after bankruptcy, your lender can foreclose regardless of exemption laws.