Changes to Ohio exemption law allows people to retain more of their assets

Posted by on Dec 3, 2013 in Uncategorized | Comments Off on Changes to Ohio exemption law allows people to retain more of their assets

Changes to Ohio exemption law allows people to retain more of their assets

SHERRY KARABIN
Legal News Reporter
Published: November 22, 2013

Every state has a set of exemption laws intended to prevent creditors from pushing debtors and their families into financial peril.
Many studies suggest that liberal exemption laws that protect debtors have a positive impact on entrepreneurship within the state since owners of small businesses may be less likely to start high-risk ventures if the punishment for failure is too great.
In recent years, exemption laws in a number of states, including Ohio, seem to be following that philosophy, allowing debtors to retain more of their assets when filing Chapter 7 and 13 cases.
“Exemption laws preserve basic items of property from seizure by creditors, so that debtors can to continue to work productively and support themselves and their families,” said Robert S. Thomas II, a partner and Akron bankruptcy attorney at Thomas, Trattner & Malone, who specializes in bankruptcy and commercial law. “These laws are intended to protect at least basic wages and essential property from seizure by creditors.
“Federal bankruptcy exemption law is pretty generous but 35 states have their own exemption laws,” said Thomas. “Massachusetts and Iowa have the most expansive laws but Ohio is becoming a much more debtor friendly state, which in theory should encourage more people to take a chance and start a business here.”
That was not always the case. In Ohio, for example, Thomas said no major changes had occurred for over 20 years in the exemption statute until 2008. That year lawmakers enacted Amended Ohio Senate Bill 281, which took effect on Sept. 30, 2008.
The amended provisions of Ohio Revised Code section 2329.66(A) raised the homestead exemption for residential property, including a mobile home, from $5,000 to $20,200 per debtor on one item or $40,400 for a husband and wife together, provided they were both on the title and occupying the property on the date of the filing.
Other exemptions went up as well, but those increases are nothing compared to this year’s changes in Ohio, which raised homestead exemptions to $132,900 per individual or $265,800 for a husband and wife.
“What this means is that if a husband and wife own a home without a mortgage that is not worth more than the $265,800 exemption they receive together, they may be able to fully exempt their home without a problem, meaning they can likely keep it,” said Thomas. “Attorneys need to be updated on current case law and trends in exemptions and objections to exemptions.”
The other big changes that took place from 2008 to 2013 in the exemption statute are a 100 percent exemption for child tax credits, earned income tax credits, college savings plans/529 plans and inherited IRAs. In addition, increases to household item exemptions have gone from $10,775 in 2008 to $12,250 in total or from $525 to $575 per item. In the case of motor vehicles, the exemption increased in 2008 from $1,000 to $3,225 and is presently at $3,675.
“This exemption is not in the aggregate and can only be used on one vehicle,” said Thomas, a leading bankruptcy lawyer Akron, Ohio. “A husband and wife who are both listed as owners on the title for a motor vehicle could each apply their exemption to the same motor vehicle.
“I believe lawmakers are not only trying to make Ohio a more friendly place to do business, I think they want to give debtors a chance at having a fresh start by allowing them to keep more of their basic necessities like their home, car and household goods.”
Thomas said some people who might not have qualified for bankruptcy in the past because of certain assets may now find that it is a viable option. “Right now about 90 percent of the people who file should be able to exempt most of their assets. I am seeing older people who live on a fixed income but own their homes now looking at filing.”
In addition to retaining their tangible items, Thomas said debtors could also potentially keep more of their personal injury/bodily injury settlements. For example, recipients may be able to exempt $23,000 of that money when filing for bankruptcy versus $5,000 several years ago. “That’s probably more than most people would walk away with anyway once they pay legal fees, medical claims, costs and other expenses,” said Thomas.
He said an individual can exempt up to $450 dollars in a bank account and is eligible in bankruptcy proceedings to apply a “wild card” exemption of $1,225 generally to any other asset that may have equity above the claimed exemption.
“Most people are surprised to find out that social security benefits, unemployment benefits or workers compensation benefits are either exempt under federal law or the Ohio exemption statute, meaning these benefits generally cannot be garnished or subject to attachment from creditors.”
Despite the changes, Thomas said bankruptcy filings are actually down this year in the state, as they are nationally.
“Case filings have been down nationally since 2011,” said Thomas. “What I have seen in the past 15 years is a gradual increase in filings per year with a maximum number in 2005 and a drop in 2006 and 2007, and then a gradual increase in filings until about 2011. Since 2011, filings are down about 12 to 15 percent.
“With the expansion of Ohio’s exemption laws, attorneys can better advise their clients on business transactions, financial matters, asset protection and financial problems.”