By:  Trev E. Peterson

The Legislature passed LB 1195 which included amendments increasing the homestead exemption from $60,000 to $120,000.  The bill was passed without the emergency clause, so the increase in the homestead exemption will be effective on July 18, 2024, which is three months after the Legislature adjourned.  The homestead exemption protects equity in a debtor’s home from forced sale to satisfy judgment liens.  There are some exceptions to the homestead exemption, such as construction liens and vendors’ liens and most consensual liens (such as a purchase money lien) where the owner waives the homestead exemption.

The homestead includes the home and the land it sits on up to one hundred and sixty acres of land or a quantity of contiguous land not exceeding two lots within any incorporated city or village.

There are a couple of interesting language changes.  Section 40-101 makes the exemption available to “[e]ach natural person residing in this state . . .”  This language supports the argument that a husband and wife may EACH claim the homestead.  Prior to the amendment the language was “[a] homestead not exceeding …”  Courts read the prior 40-101 to restrict the homestead to a property occupied by the debtors as their home and have generally not allowed a husband and wife to each claim a homestead exemption.

The second interesting change is to section 40-103, which permits the sale of a homestead to satisfy a “mechanics’, laborers’, or vendors’ liens” and “on debts secured by mortgages or trust deeds upon the premises executed and acknowledged by a claimant.”  Prior law required that in the case of a married couple, both spouses had to sign the mortgage or trust deed.  Now just the claimant, meaning the party claiming the exemption, has to sign the mortgage or trust deed.  This might allow for one spouse to grant a lien on that spouse’s interest in the homestead, without the requirement that the spouse join in the conveyance.

If a client is considering bankruptcy and has equity in the home over the existing $60,000, it would be wise to wait until the changes go into effect before filing a bankruptcy case.

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