Hold On…To Your Home Equity

Hold On…To Your Home Equity

Home ownership. It’s part of the Great American Dream. There’s nothing quite like the excitement when you are handed the keys to your new home. As time goes by, you work hard to build equity in your home.

Until recently, keeping that equity in a bankruptcy was dependent upon whether or not you met the requirements necessary to claim Nebraska’s “homestead exemption,” which allows any person filing bankruptcy to shield and keep up to $60,000 in equity. Now, thanks to an important change to Nebraska’s “homestead exemption” law in July 2014, even single bankruptcy filers without children can claim the homestead exemption. Married couples are limited to a $60,000 exemption.

Why is it important for any bankruptcy filer to claim the homestead exemption?  The exemption allows the bankruptcy filer to shield and keep their home ownership interest, even though the bankruptcy is erasing the debt on medical bills, credit card debts, etc. Equity Calculation Examples:

• Scenario 1: If you own a home worth $50,000, with no bank loan, your equity is $50,000.
• Scenario 2: You own a home worth $120,000 but owe $70,000 on a mortgage loan. Your equity equals $50,000 ($120,000 - $70,000 = $50,000).

Well…all of this begs the question: what property qualifies for this exemption? The Nebraska homestead exemption applies to equity in a “home” the debtor lives in as his/her residence on the day the bankruptcy is filed. This includes:

• A “stick” home situated on a 12-acre lot. If the equity is less than $60,000, the bankruptcy filer can keep the home and the land.
• A mobile home, or even a camper, permanently attached (skirted, with plumbing and electrical lines) to a rented lot.
• A condominium or apartment (which the bankruptcy filer owns)
• Detached garages and outbuildings, up to $60,000 in equity.
• A home in the country located on 160 acres or less.
• Two connected lots in a city/town, if the homestead is in a city/town (although this two-lot limitation is rarely enforced).

Exceptions to this rule: Rental homes or vacation homes do not qualify as a homestead and therefore would not qualify for the exemption.

If you have questions about whether your home can be protected in bankruptcy, by claiming the homestead exemption, please call us at (308) 872-8327 for a free consultation.