Nebraska Bankruptcy Exemptions: Homestead, Wildcard, and Wages

Nebraska bankruptcy exemptions let you keep up to $120,000 of equity in your home, $5,000 of equity in one vehicle, $3,000 in household goods, $5,000 in tools of your trade, a $5,000 general wildcard, your clothing and health aids, most of your wages, and your qualifying retirement accounts. Nebraska has opted out of the federal exemption system, so these state figures are the only ones available to you.¹

Home Equity: The Homestead Exemption

The homestead exemption shields up to $120,000 of equity in your primary residence from judgment liens, execution, and forced sale. Protected property includes the house, outbuildings and improvements, and the surrounding land: up to 160 acres outside city limits, or up to two contiguous lots inside an incorporated city or village.¹

Only your primary residence qualifies. Rental properties, vacation homes, and investment real estate get no protection at all.

Equity is what matters, not market value. If the house is worth $250,000 and you owe $160,000 on the mortgage, your equity is $90,000, well inside the cap. If your equity runs higher than $120,000, a Chapter 7 trustee can force a sale, pay you the exempt share, and send the rest to creditors.

Older sources still reference a $60,000 limit. That figure reflects the prior statute; the legislature has since raised it to $120,000.

Vehicles, Household Goods, Tools, and Personal Items

Several categories of personal property are protected by name under Neb. Rev. Stat. § 25-1556:²

Immediate personal possessions and clothing for you and your family, with no dollar cap.
Household furnishings and goods — furniture, appliances, computers, books, and musical instruments used for personal or family purposes — up to $3,000 in aggregate fair market value.
Implements, tools, or professional books and supplies used in your primary trade or business, up to $5,000. Motor vehicles don’t count in this category.
Up to $5,000 of equity in one motor vehicle.
Prescribed health aids for you and your dependents, with no dollar cap.

These dollar limits are scheduled for adjustment every five years by the Nebraska Department of Revenue starting in 2023, based on the Consumer Price Index.² Confirm the current figures before you file, because a CPI bump can add a few hundred dollars to what you keep.

The $5,000 Wildcard

On top of the category-specific limits, every Nebraska resident gets a $5,000 general personal property exemption under § 25-1552.³ This covers any personal property other than wages. You list what you own, assign a value to each item, and choose up to $5,000 worth to protect. It functions as a wildcard, which is especially useful for items that don’t fit cleanly into the household goods or tools categories, or for shielding equity in a vehicle beyond the $5,000 motor vehicle cap.

Trustees can and do challenge valuations. Use honest resale values, not what it would cost to replace an item new.

Wages

Nebraska limits paycheck garnishment, and the cap depends on whether you qualify as a head of family. The statute protects you by whichever formula leaves you with the most money.⁴

If you are a head of family, creditors can take no more than 15% of your disposable earnings for the week. You keep at least 85%.
If you are not a head of family, creditors can take the lesser of 25% of disposable earnings or the amount by which your weekly earnings exceed 30 times the federal minimum wage ($7.25 per hour, so $217.50 per week).

To qualify as a head of family you have to actually support at least one person connected to you by blood, marriage, adoption, or guardianship, under a moral or legal duty to do so.⁴ Being married alone isn’t enough if your spouse is self-supporting and you have no dependents.

Disposable earnings means what’s left after legally required deductions like taxes and Social Security. Voluntary deductions for retirement contributions or health insurance don’t reduce the number the garnishment is calculated against.

Retirement Accounts and Social Security

Employer-Sponsored Plans

Accounts that qualify under federal ERISA rules — 401(k)s, defined-benefit pensions, 403(b) plans, and similar employer-sponsored retirement vehicles — get unlimited creditor protection under federal law, which preempts state law. The main exceptions are IRS tax liens, qualified domestic relations orders in divorce, and situations involving fraud or criminal restitution.

IRAs

Nebraska protects interests in plans that qualify under IRC sections 401(a), 403(a), 403(b), 408 (traditional IRAs), and 408A (Roth IRAs), but only “to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.”⁵ That language is where fights happen. A bankruptcy court looks at your age, health, income prospects, and actual retirement needs rather than treating any balance as automatically exempt. Trustees push back on large balances held by younger debtors with decades of earning potential ahead of them.

Watch the timing. If you established a qualifying plan or increased contributions within two years before filing, the exemption may not apply to those newer contributions.⁵ The rule exists to prevent last-minute sheltering of assets.

Social Security

Social Security benefits are protected by federal law, not state law. Under 42 U.S.C. § 407, Social Security payments cannot be seized by execution, garnishment, or any other legal process, and they are explicitly shielded from the operation of any bankruptcy or insolvency law.⁶ There is no dollar cap. Once the funds hit a bank account and mix with other money, though, tracing which dollars came from Social Security gets complicated. Keeping benefits in a separate account makes the exemption much easier to enforce.

You Must Use Nebraska’s Exemptions, Not the Federal Set

Federal bankruptcy law lets each state decide whether its residents can choose between the federal exemption list and the state list. Nebraska has opted out, so you have to use Nebraska’s exemptions when filing here.¹

You also need the right residency. For the 180 days before filing, you must have lived in Nebraska (or at least within the federal district covering it), or lived here for a greater share of that 180-day window than anywhere else.⁷ If you’ve recently moved to Nebraska, count the days carefully before you pick a filing date; the exemption set you end up using depends on where you lived earlier in the lookback period as well.

How You Actually Claim Them

Exemptions aren’t automatic. You claim each one on Schedule C (Official Form 106C), which is part of the bankruptcy petition package.⁸ For each item you want to protect, you list the property, cite the specific Nebraska statute that covers it, and state the value you’re claiming as exempt. Forget to list an asset and you may lose it. Cite the wrong statute or overvalue the exemption and the trustee will object, forcing you to amend.

Because Nebraska requires state exemptions, check the Schedule C box indicating state law rather than federal exemptions. Pro se filers get this wrong often enough that it’s worth double-checking.

Chapter 7 Versus Chapter 13: Why the Chapter Changes What Exemptions Do

In Chapter 7, the trustee liquidates your non-exempt property and distributes the proceeds to creditors. Exemptions are your only defense; anything they don’t cover is fair game. If your car has $8,000 of equity and the vehicle exemption covers $5,000, the trustee can sell the car, pay you $5,000, and send the remaining $3,000 to creditors (unless you can also apply the wildcard to the gap). Most consumer Chapter 7 cases are “no-asset” cases where everything falls within the exemption limits, but verify that before filing.

In Chapter 13, you keep all your property, exempt and non-exempt, in exchange for paying creditors over a three-to-five-year plan. Exemptions still matter, because the plan has to pay unsecured creditors at least what they would have received in a Chapter 7 liquidation. $10,000 of non-exempt property means your plan has to pay unsecured creditors at least $10,000 over its life. More non-exempt equity means higher monthly plan payments.

If you have significant equity that exceeds Nebraska’s limits and you want to keep the property, Chapter 13 is usually the better path. If everything fits inside the limits and you pass the means test, Chapter 7 offers a faster discharge with no repayment obligation.

1
Nebraska Legislature. Nebraska Revised Statutes Chapter 40 – Homesteads 40-101
2
Nebraska Legislature. Nebraska Revised Statutes 25-1556
3
Nebraska Legislature. Nebraska Revised Statutes 25-1552 – Personal Property, Amount Exempt From Forced Sale
4
Nebraska Legislature. Nebraska Revised Statutes 25-1558
5
Justia Law. Nebraska Revised Statutes 25-1563.01 – Stock, Pension, or Similar Plan or Contract
6
Office of the Law Revision Counsel. United States Code Title 42 Section 407
7
Office of the Law Revision Counsel. United States Code Title 28 Section 1408
8
United States Courts. Schedule C: The Property You Claim as Exempt