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Bankruptcy exemptions in Ohio: What property can you hold onto?

A common misconception about bankruptcy is that it always requires giving up most or all of your property.

In practice, that is not necessarily the case. Indeed, you may be able to use a system of laws called exemptions in order to keep many of your possessions.

How do these exemptions work in Ohio? In this post, we will answer that question.

Federal law vs. state law

Bankruptcy is federal law. But the law on exemptions - property exempt from creditors that you can keep after filing bankruptcy - varies by state.

In Ohio, state law has some very specific exemptions that apply in Chapter 7 bankruptcy proceedings. These include:

  • Homestead
  • Cash-on-hand
  • Vehicle
  • Household goods
  • IRA accounts

Each of these exemptions has a specific dollar value. For example, the cash-on-hand exemption allows you to hold onto up to $450 in cash after filing bankruptcy. Similarly, the vehicle exemption allows you to retain value of up to $3,675 in a motor vehicle.

The household goods exemption is larger still. It applies to items such as furniture and appliances and goes up to $12,250.

But the biggest exemption is by far the homestead exemption. It applies to residential property and allows for an exemption of $132,000 in value. If the house is held jointly by spouses, the exemption is twice that amount: $264,000.

Homestead exemption

The homestead exemption amounts used to be much lower. But the Ohio Legislature amended state law to raise them, effective in March 2013. If a creditor has a claim against you that predates this law change, the bankruptcy trustee will have to clarify which law applies.

There are also various scenarios that can come into play when a homestead is involved. One variable is mortgage status: whether are carrying a mortgage and, if so, whether payments are current. Another is whether your house is worth more or less than the amount of the homestead exemption.

How the value of your house compares to how much you may still owe on the mortgage is another factor in determining the applicability of the homestead exemption to your situation. If you have equity in your house - i.e., it is worth more than you owe on it - you may very well be able to keep the house despite filing bankruptcy.

This is only the case, however, if the equity is less than the amount of the homestead exemption. And as we noted above, the amount of the exemption depends on whether or not you own the spouse jointly with a spouse.

It is also necessary to actually live in the house to get the homestead exemption. You can't get the exemption if you rent the place out to someone.

The role of a knowledgeable attorney

The idea behind exemptions is that bankruptcy is supposed to help provide a fresh monetary start. To get such a start, you shouldn't have to start from zero, after giving up everything you have.

Many issues can arise, however, in applying bankruptcy exemptions to your particular case. It makes sense to have a knowledgeable attorney to guide you through the process as you regain your financial footing.

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