Much has happened on the Ohio Homestead Exemption front since I last wrote about it. In the last article I reported that it was increasing to $125,000 effective March 27, 2013. It did that. But can you believe it went up again five days later?
For a quick review an exemption is that portion of an asset’s value which is safe from your creditors. In Ohio most exemptions are created by Ohio law. Some are created by Federal law and included in the Ohio Exemption scheme. These exemption define what you can keep when you file a chapter 7 bankruptcy.
A few years back the General Assembly indexed the Ohio homestead exemption law to adjust for the cost of living every few years. That way Ohioans would not be stuck for years on end with outdated exemptions like before. The cost of living increase kicked in on April 1, 2013. The Ohio Homestead Exemption is now $132,900. This means that each titled owner in your residence can protect that much money from your creditors after deduction for mortgages, and HELOCs. For most married couples that means $265,800 of equity in your home is safe from creditors. What a difference five days can make!
This increase did not make attorneys for your creditors happy. This includes the chapter 7 trustees. Both of these groups earn fees by collecting, liquidating and distributing non- exempt assets. In the typical situation if a debtor files chapter 7 and has more equity than was exempt in the home, the trustee’s sworn duty is to sell the house, collect a fee, and pay the creditors. For creditor attorneys the process is different but the dynamic is the same. Bottom line, a higher Ohio Homestead Exemption cuts into income.
They were quick to seize on some unusual language in the enactment portion of the new law. They argued the new law only applied to claims that accrued after the effective date of the legislation. The Ohio attorney members of NACBA (National Association of Consumer Bankruptcy Attorneys) anticipated this ploy and were ready. They want to be notified of any efforts to water down the law. They are poised to weigh in on any motions filed to limit the Ohio homestead exemption.
On August 8, 2013, Judge Kay Woods, Bankruptcy Judge in Ashtabula, Ohio, which is part of the Northern District, ruled in favor of the new exemption in an effort by a debtor’s attorney to avoid a judicial lien in a chapter 7 case. The creditor used the anticipated argument. She found that the Ohio homestead exemption in effect at the time of filing controls, regardless of when the lien was filed.
This opinion should go a long way to settle the issue of how the new protection of your home’s equity plays out in chapter 7 cases in Ohio Bankruptcy Courts. There are a number of such motions pending throughout the state. NACBA is on it.