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8/14/2019 Ohio Bankruptcy - Exemptions and How They Can Help You
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SCOTT R. NEEDLEMAN
BANKRUPTCY AND FORECLOSURE DEFENSE ATTORNEY
OHIO BANKRUPTCY EXEMPTIONS AND HOW THEY
CAN HELP YOU
A Look At Ohio Bankruptcy Exemptions
and How It Can Help You Retain the Majority
of Your Assets When You File for Bankruptcy
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Each year, millions of hard-working individuals find themselves facing
financial difficulties that appear to have no solution. Due in large part to
the recession the United States recently experienced the number of people
who are struggling financially has increased dramatically. As a result, the
number of bankruptcy petitions filed across the country has reached record
highs. The decision to seek protection by filing for bankruptcy is never an
easy decision to make; however, it is often the best solution. One of the
most common reasons why people are hesitant to file bankruptcy is the
fear that filing for bankruptcy means losing assets-assets that have taken a
lifetime of hard work to acquire. While this fear is certainly understandable,
it is largely unfounded. Most debtors are able to keep their home, vehicle,
and a variety of other assets when they file for bankruptcy by utilizing the
Ohio bankruptcy exemptions.
BANKRUPTCY BASICS CHOOSING A CHAPTER
To understand how the Ohio bankruptcy exemptions fit into the overall
bankruptcy process you first need a basic understanding of bankruptcy.
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The U.S. Bankruptcy Code allows an individual debtor to file for bankruptcy
protection under chapter 7, 11, 12, or 13. Although Chapter 11 can be
used by an individual it is more commonly utilized by a small business.
Chapter 12 is limited to those who qualify as a family fisherman or family
farmer. Therefore, most debtors file under either chapter 7 or chapter 13
when they file bankruptcy.
A debtor must qualify under what is referred to as the "means test" in
order to file a chapter 7 bankruptcy. The means test requires a debtor to
perform a series of calculations aimed at determining whether the debtor's
income is at or below the median income for similarly situated households
in Ohio. If the debtor does not qualify under the means test then a chapter
13 must be used. A debtor may also choose to file a chapter 13 even if he
or she qualifies to file a chapter 7.
A chapter 7 bankruptcy is often referred to as a "liquidation" bankruptcy"
while a chapter 13 is known as a "wage earners" bankruptcy. The names
are both somewhat
deceiving. In a chapter 7
bankruptcy a debtor's non-
exempt assets are subject
to be confiscated by the
bankruptcy trustee,liquidated, and the proceeds used to pay creditors; however, in reality
most chapter 7 debtors are able to use the applicable exemptions to
protect most, or even all, of their assets. A debtor whose income is too
high to qualify under the chapter 7 means test, or who has valuable assets
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that are not exempt, will need to file a chapter 13 bankruptcy. In a chapter
13 bankruptcy the debtor is required to develop a repayment plan that
allows the debtor to repay most of his or her debts over an extended
period of time, typically three to five years.
WHAT ARE EXEMPTIONS?
Exemptions are what allow a debtor to retain property and other assets
during the bankruptcy process. If an asset is exempt that essentially means
that it is out of reach of the court or trustee and cannot be used, or sold,
to repay any of the debtors debts. In addition, if you are married and file a
joint petition with your spouse you are entitled to double your exemptions
allowing you to protect more assets.
FEDERAL VS.STATE EXEMPTIONS
Thankfully, the bankruptcy laws in the United States do not require a
debtor to forfeit everything the debtor owns in order to take advantage of
the protection offered by filing for bankruptcy. On the contrary, exemptions
are built-in at the federal level and in many cases at the state level as well.
The ability to file for bankruptcy protection is found in federal statutes in
the United States, meaning that the federal court system has jurisdiction
over bankruptcy proceedings in the U.S. This also means that with few
exceptions the process and procedures for a debtor filing bankruptcy in one
state are the same as a debtor filing in another state. The most prominent
exception to that general rule relates to exemptions.
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The U.S. Bankruptcy Code includes exemptions that a debtor may be able
to use; however, the individual states are also allowed to create their own
set of exemptions. The state in which a debtor is considered a resident at
the time the bankruptcy petition is filed will determine which set of
exemptions the debtor is allowed to use. Some states require a debtor to
use the federal exemptions while other states require a debtor to use the
state exemptions. Still other states allow a debtor to choose either the
federal or state exemptions but a debtor cannot mix the two. In Ohio a
debtor is required to use the state exemptions, meaning the federal
exemptions are not an option for a debtor filing bankruptcy in Ohio.
OHIO EXEMPTIONS
The list of exemptions to which you are entitled if you file bankruptcy in
Ohio is lengthy; however, there are some commonly used exemptions that
provide you with an idea of how much you can protect when you file for
bankruptcy.
Homestead $132,900
Vehicle $3,675 in one motor vehicle
Household Goods $12,250 total and up to $575 in a single item
Cash $450
Wages 75 percent of wages
Retirement/Pensions
IRAS and Roth IRAs to $1,171,150 plusprivate pension and tax-exempt retirement accounts
Benefits unemployment and workers compensation benefits
Wildcard -- $1,225 in any asset not covered elsewhere
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As you should be able to see the average debtor is able to exempt a
significant amount of assets. Remember as well that if you are filing a joint
petition with a spouse the exemption amounts are doubled.
EXEMPTIONS AND SECURED DEBTS
As a debtor it is important that you understand how an exemption operates
if it is being used to protect a secured debt. And exemption can protect an
asset from being sold to repay creditors
during the bankruptcy process;
however, an exemption does not
release a debtor from liability for the
debt. By way of example, let's assume
that you own your home that was
purchased by taking out a mortgage
loan. The lender from whom you
borrowed the money to purchase the home is considered a secured
creditor because the home is considered collateral, or security, for the loan.
Let's further assume that the current market value of your home is
$200,000 and that the balance owed on your mortgage loan is $150,000.
You have $50,000 of equity in your home, all of which can be protected by
using the Ohio Homestead exemption when you file for bankruptcy. The
Homestead exemption operates to protect your home from the trustee
selling the home and using the equity you have built up in the home to
repay creditors. You still, however, owe the lender $150,000 on the
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mortgage loan. To keep your home you will need to enter into a
reaffirmation agreement with your lender during the bankruptcy process.
With a better understanding of how the Ohio bankruptcy exemptions
operate you should find that many of your fears regarding the bankruptcy
process have disappeared. Although each debtors situation is unique, and
only an experienced Ohio bankruptcy attorney can provide you with
specific advice, it should be clear that most debtors are able to retain the
majority of their property while still addressing their financial crisis by filing
for bankruptcy protection.
Ohio State Bar Association,Ohio Law Allows Property Exemptions in
Bankruptcy
NOLO,Ohio Bankruptcy Exemptions
U.S. Courts,Bankruptcy Basics
http://thecolumbusbankruptcylawyer.com/https://www.ohiobar.org/ForPublic/Resources/LawYouCanUse/Pages/Ohio-Law-Allows-Property-Exemptions-in-Bankruptcy.aspxhttps://www.ohiobar.org/ForPublic/Resources/LawYouCanUse/Pages/Ohio-Law-Allows-Property-Exemptions-in-Bankruptcy.aspxhttps://www.ohiobar.org/ForPublic/Resources/LawYouCanUse/Pages/Ohio-Law-Allows-Property-Exemptions-in-Bankruptcy.aspxhttps://www.ohiobar.org/ForPublic/Resources/LawYouCanUse/Pages/Ohio-Law-Allows-Property-Exemptions-in-Bankruptcy.aspxhttp://www.nolo.com/legal-encyclopedia/ohio-bankruptcy-exemptions.htmlhttp://www.nolo.com/legal-encyclopedia/ohio-bankruptcy-exemptions.htmlhttp://www.nolo.com/legal-encyclopedia/ohio-bankruptcy-exemptions.htmlhttp://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspxhttp://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspxhttp://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspxhttp://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspxhttp://www.nolo.com/legal-encyclopedia/ohio-bankruptcy-exemptions.htmlhttps://www.ohiobar.org/ForPublic/Resources/LawYouCanUse/Pages/Ohio-Law-Allows-Property-Exemptions-in-Bankruptcy.aspxhttps://www.ohiobar.org/ForPublic/Resources/LawYouCanUse/Pages/Ohio-Law-Allows-Property-Exemptions-in-Bankruptcy.aspxhttp://thecolumbusbankruptcylawyer.com/8/14/2019 Ohio Bankruptcy - Exemptions and How They Can Help You
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About the Author
Scott R. Needleman
Every associate at The Needleman Law Office is committed to handling
your case in both a personal fashion and in a professional manner. In other
words, we treat you the way we would want to be treated. We will take a
personal interest in your situation, making sure you understand exactly
what is happening and what options you may have. Then well fight to
ensure the best possible outcome for your situation.
The Needleman Law Office5300 E. Main, Suite 109Columbus, OH 43213614-575-1188
http://thecolumbusbankruptcylawyer.com/
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