Q: I’ve heard that Ohio has revised its exemption laws. Exactly what is an exemption and how do these revisions affect me?
A: Ohio law says that, if a creditor gets a judgment against you to collect money you owe, that creditor can take any property you own except certain “exempt” property. An exemption, then, is the portion of your property that the creditor cannot take to satisfy a judgment. Or, if you declare bankruptcy, an “exemption” is the portion of your property that you do not have to turn over to a bankruptcy trustee.
Q: What does it mean to execute on a judgment?
A: To get the money you owe, a creditor first must go to court to get a judgment against you. Simply getting a judgment against you may not be enough to get you to pay, though. To enforce, or “execute” on that judgment, the creditor may have to seize your property, which may include your wages (through a “garnishment”) or bank account funds. The creditor also may take your personal property, sell it, and then apply the proceeds from the sale to the judgment amount.
Q: What is the effect of Ohio’s changes to its exemption law?
A: Senate Bill 281, which went effect on September 30, 2008, amends Ohio Revised Code Section 2329.66 and significantly increases the dollar amount of certain categories of property that an Ohio debtor may hold exempt from execution and garnishment.
Q: If I file bankruptcy or have a judgment taken against me, is the equity in my house exempt?
A: Yes, some of the equity will be exempt as long as you are using the house as your residence. Under Ohio’s old law, $5,000 of the equity in your home was exempt. Under Senate Bill 281 and after September 30, 2008, you can exempt as much as $20,200 in equity in your personal residence.
Q: What does the increase in the exemption for my residence mean to me?
A: The best way to explain the difference in the changes to Ohio’s exemption law is by example. Let’s say your residence is valued at $100,000, and the mortgage lender has a lien on the residence for an $80,000 balance on the mortgage. That means you have $20,000 in equity in your home.
1. Under the old exemption law, only $5,000 of the equity in your residence was exempt. Therefore, a bankruptcy trustee or judgment creditor could force the sale of your residence to recover the $15,000 of non-exempt equity. After the sale of the residence, the bankruptcy trustee or creditor would have to pay you the $5,000 exemption, and you or the bankruptcy trustee or creditor could keep the remaining proceeds from the sale of the property.
2. Under the revised exemption law, $20,200 of the equity in your residence is exempt. In this example, there would be no non-exempt equity in your residence. As a result, a bankruptcy trustee would give up rights to the property and no other creditor would be able to force the sale of your residence.
Q: If I am self-employed, is any of my business property exempt?
A: The exemption for “tools of the trade” is increased from $750 to $2,025. “Tools of the trade” may include property such as a mechanic’s tools, farming equipment, a Web designer’s computer or other property that is used in your trade or business.
Q: What are the increases in exemptions to other property I may have?
A: The significant increases include the following:
1. The exemption in one motor vehicle changes from $1,000 to $3,225.
2. The exemption in money you can receive (within the previous 12 months) to compensate for personal bodily injury (excluding pain and suffering) is increased from $5,000 to $20,200.
3. The exemption in personal, family and household items is changed from smaller exemptions in specific personal property to a $10,775 total exemption for most items of personal property, although you may not value any single item at more than $525. You also have a total exemption of $1,350 in one or more items of jewelry held for personal, family or household use.
4. The exemption for “other property,” which only applies in bankruptcy cases, is changed from $400 to $1,075.
Q: Will Ohio’s exemption laws have to be updated in the future?
A: So that the exemption amounts stay current with present-day prices, the Ohio legislature added a provision to the revised exemption law that automatically adjusts each exemption based on the consumer price index beginning on April 1, 2010, and on the first day of April every three years after 2010.
11/3/2008
This “Law You Can Use” column provided was by the Ohio State Bar Association (OSBA). It was prepared by Rachel Mulchaey of the Columbus office of Bricker & Eckler LLP. The column offers general information about the law. Seek an attorney’s advice before applying this information to a legal problem. For more information on a variety of legal topics, visit the OSBA’s Web site at www.ohiobar.org.