If you’re filing bankruptcy in Ohio, you must use the state’s exemptions to protect your property. Ohioans aren’t allowed to use the federal bankruptcy exemptions. Ohio has a homestead, motor vehicle, and wildcard exemption. It also has exemptions for various kinds of personal property and money benefits.
If mounting credit card debt is keeping you up at night, filing bankruptcy in Ohio can give you the fresh start and peace of mind you deserve. Many Ohioans are reluctant to file for bankruptcy because they fear that they’ll lose their valuable possessions, such as their home or motor vehicle. Fortunately, Ohio state law outlines exemptions you can use to protect specific assets or property you own.
This article explains common Ohio bankruptcy exemptions and how they work.
Why Ohio Bankruptcy Exemptions Are Important in Chapter 7 Bankruptcy
The Bankruptcy Code is a federal law that governs bankruptcy cases across the U.S. But some states make their own exemption laws. Federal and state bankruptcy exemptions do the same thing: They protect debtors who file bankruptcy from losing all their possessions. Simply put, these laws determine the property you can protect from your creditors.
When you file Chapter 7 bankruptcy in Ohio, the court will appoint abankruptcy trustee. The trustee has the authority to sell your non-exempt assets and use the proceeds to pay your creditors. But if you’re like the majority of Chapter 7 filers, many or all of your assets will be exempt. The trustee can’t sell your exempt assets.
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Who Can Use the Ohio Bankruptcy Exemptions?
If you’ve lived in Ohio for at least two years you have to use the Ohio bankruptcy exemptions. You can’t use federal exemptions. One advantage of having to use state bankruptcy exemptions is that you’ll also be able to use the federal nonbankruptcy exemptions. These exemptions protect certain qualifying property, like federal and military retirement benefits.
Does Ohio Allow Filers To Use Federal Bankruptcy Exemptions?
Although some states in the country allow people to choose between the federal bankruptcy exemptions and state exemptions, this option isn’t available if you’re filing bankruptcy in Ohio. Ohio, like many other states, has its own bankruptcy exemptions. If you’ve lived in Ohio for at least two years, you have to use the Ohio bankruptcy exemptions instead of the federal exemptions. This two-year requirement was established to prevent people from moving to another state to take advantage of better bankruptcy exemptions.
Ohio Bankruptcy Exemptions
The Chapter 7 bankruptcy process is similar across the U.S. When you file your bankruptcy petition, you agree to temporarily place your assets under the control of the Ohio bankruptcy court. Your property becomes part of yourbankruptcy estate and is split into two categories: exempt property and non-exempt property. You can use exemptions to protect the full value of some assets or a specific amount of others. If all your property is exempt, your unsecured debts will be discharged and you won’t lose anything. If you have nonexempt property, the bankruptcy trustee can sell it to pay your unsecured creditors.
Let’s look more closely at the three main categories of exemptions: real property, personal property, and money benefits.
Real Property: The Ohio Homestead Exemption
If you’re a homeowner, you’re probably most concerned about whether you can keep your home if you file Chapter 7 bankruptcy. Luckily, Ohio’s homestead exemption is quite generous. It allows you to protect up to $145,425 of equity in real property you use as a primary residence. Real property means your home and the land it sits on. It’s your primary residence if it’s the main home you live in. If you own real estate that’s an investment property, it won’t be protected by this exemption.
It’s important to understand that this exemption is based on the equity you have in the home. To calculate the equity, you’ll subtract how much you owe on the mortgage from the current value of the house.
For example, if you own a home in Cleveland worth $460,000, but you’re underwater on the mortgage and owe $500,000, then you don’t have any equity in the home. In this case, there’d be nothing for your bankruptcy trustee to come after if you file Chapter 7. But if you own a home that’s worth $460,000 and you only owe $350,000, you have $110,000 of equity. Since this is less than $145,425, you’ll be protected by the homestead exemption and can keep the house.
Personal Property Exemptions
Personal property is essentially anything you own that can be moved. Personal property exemptions cover everything from your car to household goods to health aids. Some of Ohio’s personal property exemptions apply to a combination of assets up to an aggregate amount. Others apply only to specific items, like jewelry and household goods. Married couples are allowed to double these exemption amounts.
Here are some of the most common personal property exemptions bankruptcy filers use in Ohio.
Having a motor vehicle to get to work, shuttle your family around, and run errands is very important. So it’s understandable if you’re worried about having to give up your car if you file Chapter 7. Ohio’s bankruptcy exemption protects up to $4,000 of equity in your motor vehicle. Again, equity is the market value of your car minus what you owe on the car loan.
So if you own a vehicle worth $10,000, and you have $7,000 outstanding on your car loan, you have $3,000 in equity. In this case, your car would be protected under Ohio law. On the other hand, if you owned the vehicle outright, you’d have $6,000 of nonexempt equity in the car, and your trustee could sell it, give you the exemption amount, and use the rest to pay off your creditors.
Other Personal Property
Personal property includes furniture, electronics, art, and much more. You can protect the following personal property:
You can protect up to $500 of cash on hand or deposit.
You can protect up to a total of $13,400 of household goods, including furnishings and electric appliances. Each item must be valued at $625 or less.
Jewelry is exempt up to $1,700.
You can protect your interest in a single burial plot.
You can protect up to $25,175 of a personal injury award if you receive it within 12 months of your bankruptcy filing.
You can protect up to $2,025 of value in books, implements, and tools of your trade, business, or occupation.
The wildcard exemption in bankruptcy allows you to protect assets of your choosing up to $1,325 if you’re filing as an individual. You can use this to protect assets that aren’t named in Ohio state law or you can add this amount to an existing personal property exemption to increase the amount.
In addition to real and personal property, you may have money in a retirement account, receive public benefits, or be entitled to insurance proceeds. Here’s how each is protected by exemptions in Ohio.
Alimony and Child Support Exemption
Child support and alimony are exempt in Ohio to the extent that these payments are reasonably necessary for the ongoing support of the bankruptcy filer and their dependents.
As part of the federal nonbankruptcy exemptions, you can protect tax-exempt retirement accounts, such as 401(k)s, 403(b)s, money purchase and profit-sharing plans, SIMPLE IRAs, SEP, and defined benefit plans.
Public employees’, police officers', and firefighters' pensions or annuities are fully protected.
Benefits for dependents of volunteer firefighters are fully protected.
Death benefits of public safety officers, including ERISA-qualified benefits, Roth IRAs, IRAs, and Keoghs that are needed for support are fully protected.
The rule of thumb is that any pension that’s covered by federal tax exemptions is typically considered fully exempt under bankruptcy law.
Your take-home wages are exempt up to 75% of your disposable weekly earnings or 30 times the federal hourly minimum wage, whichever is greater.
Public Benefit Exemptions
Ohio exemptions fully protect many public benefits, including:
Child tax credits and earned income tax credits
Vocational rehabilitation benefits
Workers' compensation benefits
Crime victim’s compensation
Ohio code provides several exemptions for insurance, including:
Up to $5,000 of benevolent society benefits
Group life insurance proceeds or policy
Fraternal benefit society
Disability benefits necessary for support
Life insurance proceeds for your spouse
You can also protect life insurance proceeds if your life insurance policy prohibits payment to creditors.
Should You File Chapter 7 bankruptcy?
If you’re overwhelmed by credit card debt, medical bills, or other unsecured debts, Chapter 7 may bring the debt relief you need. When you file bankruptcy, the bankruptcy trustee can sell any non-exempt assets you own in a process called liquidation. Luckily, most people who file Chapter 7 bankruptcy get to hang on to everything they own because the property is protected by exemptions.
If you have a lot of non-exempt assets or a lot of secured debt, you may want to consider filing Chapter 13 bankruptcy instead. Chapter 13 includes a repayment plan that allows you to catch up on certain debts and keep important property like your home or car.
If you aren’t sure which chapter to file or which Ohio bankruptcy exemptions to use, consider talking to a bankruptcy attorney. You can usually schedule a free consultation with a bankruptcy lawyer to get legal advice specific to your situation. If you think Chapter 7 is right for you and your case is straightforward, you can use Upsolve’s filing tool to file your bankruptcy case for free.