In every state there exists a list of property that is protected from creditor garnishments and property seizures. We call these laws Exemptions. In theory, these laws are designed to prevent creditors from taking away everything a person owns, but in practice few debtors know how to assert their exemption rights and they often lose every dollar they own when creditors garnish their bank accounts.
Nebraska law provides a fairly decent list of exempt property, but the court procedure to claim exemptions is confusing to the average judgment debtor. I have actually consulted with a former county prosecutor who lost his home because he did not know how to claim the Homestead exemption. The required court forms that are supposed to be mailed to a judgment debtor when a garnishment is issued are vague and confusing. The forms do a poor job of explaining the procedure and provide no guidance to claim exemptions. Senior citizens frequently lose their Social Security benefits—a protected asset under federal law—because they simply do not know how to object to the garnishment. New federal regulations have curbed that practice, but the problem still exists.
I estimate that 99% of all Nebraska bank account garnishments could be stopped if a person properly claimed their exemption rights. Nebraska Statute 25-1552 protects up to $2,500 of any personal property, including bank deposits. Married debtors may protect up to $5,000 in their joint bank accounts.
This is what must be done to stop a bank account garnishment and most other property seizures as well.
- Request a Court Hearing. Nebraska law requires a judgment debtor to file a written request for a garnishment hearing with the Clerk of the Court within three (3) days after receiving the garnishment notice. Holy Cow! Just 3 days for an unrepresented individual to figure out how the request a court hearing? Yes, that is the rule and it is one of the harshest court rules out there. The court forms mailed to the judgment debtor should include a form to request the hearing, assuming the creditor was honest enough to send the form. (Depending on a judgment creditor to send out the official forms is akin to asking a fox to guard the chickens, but that is our law. Hmm . . . maybe our legislators should rethink that procedure and have the Clerk of the Court mail the notice and allow debtors 30 days to respond. Just a thought.)
- File an Inventory of All Your Property. To assert one’s exemption rights, Nebraska Statute 25-1552 requires a debtor to provide a complete list of all their property, not just the bank account. This includes all real property (homes, land, farms) and personal property (cars, furniture, bank accounts, etc.).
- List the Liens Against Property. If a property item is subject to a creditor lien, such as a home mortgage or auto loan or furniture loan, list the name of the creditor and the amount owed next to each property item.
- Claim the Exemption Law. A judgment debtor must specify the particular exemption law they are claiming for each property item listed. There are about a dozen common exemption laws utilized in Nebraska plus a few federal exemption laws that are available as well. Some exemption laws are specific to certain type of property, such as the Homestead Exemption of 40-101 that protects the equity of a person’s residence, while other exemption laws may be applied to different types of property, such as the “wildcard” exemption of 25-1552.
- Show Up for the Exemption Hearing. As a general rule, you lose every hearing you fail to attend. The Clerk of the Court will normally mail a notice of when the court hearing will take place, but it is generally wise to call the Clerk if you do not receive notice of the hearing within 7 days.