Ohio Bankruptcy Exemptions and Law
COVID-19 Statement: Ohio's court's are conducting most business remotely. Ohio has separate bankruptcy courts for the Northern and Southern Districts, and the offices of both are closed for most in-person business until further notice. The office closures have led to changes in the courts' procedures for filings, hearings, payments, and other matters. If you are filing for bankruptcy, have a scheduled hearing, or have other business with the court, please check the court's website for its updated procedures.
If you are having difficulty paying your bills and you don't see your situation improving in the future, filing for bankruptcy may be your best option. Bankruptcy could give you the breathing space you need to restructure or eliminate your debt so you can start over with a clean slate.
Bankruptcy is governed by federal law under the U.S. Bankruptcy Code. The code provides federal bankruptcy exemptions. But states can also decide what property is exempt from the bankruptcy process and Ohio has created its own state exemptions. You can keep the exempt property and it is generally protected from your creditors.
When you file for personal bankruptcy, you have two options:
- Chapter 7 Bankruptcy. This is also referred to as a “liquidation" bankruptcy and your assets will be sold to pay your creditors in return for eliminating some types of debt. To qualify for Chapter 7 your household income must be lower than the median income for Ohio.
- Chapter 13 Bankruptcy. This is sometimes known as a debt “restructuring" and can be used when you have enough income to pay your debts but need to rework them so you can pay them off under a court-approved repayment plan. This type of bankruptcy is popular with homeowners because it often allows them to keep their home.
No matter which bankruptcy option you choose, the bankruptcy court will issue an automatic stay when you file. This is one of the primary benefits of bankruptcy because it stops all collection actions by creditors until a judge determines who should get paid. For example, if you have been unable to pay your mortgage, filing will stop the foreclosure process.
Secured vs. Unsecured Debt
With unsecured debt, your creditors have no right to seize your property if you fail to repay them. Some common examples of unsecured debt are credit card debt, medical bills, and court judgments. Some types of unsecured debt, like child support payments, must be paid in full.
Secured debt covers situations where your creditor can seize your property if you fail to pay. The two most common secured debt situations are when you have either a mortgage or a car loan.
If you choose Chapter 7 bankruptcy, most of your unsecured debt will be eliminated. But you will have three options for secured debt:
- Return it to the lender. In this case, you lose your property but are no longer responsible for the debt.
- Keep the property and continue your payments. If you can protect your equity in the property using an exemption and are current with your payments, you can often keep the property and continue paying down the debt.
- Purchase the property. In the unlikely situation where you can afford to purchase the property, you will be allowed to do so. However, the property must fall within one of the exemptions, and other requirements must be met.
With Chapter 13 bankruptcy secured debt is usually restructured so that you can keep your property, but with smaller payments over a longer period. Your home mortgage is not included in the Chapter 13 plan, but if you keep making payments you will keep your home. In most cases the bankruptcy trustee will negotiate an agreement to repay any missed mortgage payments. Much of your unsecured debt can be eliminated, but you will usually need to pay at least some of it.
The goal of personal bankruptcy is not to punish those who can't pay their bills. The goal is to give you a fresh start. To help with this, Ohio residents can take advantage of certain exemptions. Property that is exempt is protected from creditors and cannot be taken from you in bankruptcy if it has not been pledged as collateral.
Ohio also allows married couples who file jointly to double the amount of each exemption. But each spouse is only allowed to claim an exemption for the property that belongs to them. For example, there is a $4,000 exemption for motor vehicles. If the husband owns a car valued at $8,000 he will only be allowed to apply a $4,000 exemption to the vehicle because he cannot use his wife's share of the exemption for his car.
You will be allowed to exempt up to $145,425 of your equity in one piece of property you use as a residence. If you file with your spouse and file jointly, that lets you protect up to $290,850 from your creditors. The exemption amount applies to houses, condos, manufactured homes, or mobile homes.
Wild Card Exemption
This protects up to $1,250 of the value of any property you choose. You can use it to protect something not covered by the other exemptions or add it to another exemption to increase the exempt amount. However, this exemption cannot be applied to real estate.
Personal Property Exemption
The following types of personal property enjoy an exemption in Ohio:
- $500 in cash.
- $13,400 in household goods up to a maximum of $625 for each item. This applies to furniture and appliances.
- $4,000 of the value of one motor vehicle.
- $1,700 of jewelry.
- $25,175 of a personal injury award that you received in the 12 months before filing.
- Your interest in one burial plot.
You can exempt either 30 times the federal minimum wage or 75 percent of your disposable weekly earnings, whichever is higher. Disposable income is what you have leftover after payroll deductions for taxes and allowed bankruptcy expenses.
Tools of the Trade Exemption
Up to $2,550 of the value of tools of your trade, business, or occupation. This includes books, instruments, and other items you use to make a living.
Most types of retirement benefits are exempt in Ohio, including:
- Tax-exempt retirement accounts like your 401(k) or profit-sharing plan.
- IRAs and Roth IRAs
- Private pensions
- Benefits through the state teacher retirement system
Spouse and Child Support
Any reasonably necessary payments you receive for spousal or child support are exempt.
Public Benefits Exemption
Most state and federal benefits are exempt in bankruptcy, including:
- Unemployment compensation
- Earned income and child tax credits
- Workers' compensation
- Disability assistance payments
- Crime victim's compensation that you received in the 12 months before filing
Other commonly used exemptions include:
- 529 college savings plans.
- Business partnership property.
- Benevolent society death benefits of up to $5,000.
- Group life insurance policies or proceeds.
- Life, endowment, or annuity contracts for your spouse, child, or other dependents.
If you are filing for bankruptcy, you must have received credit counseling within 180 days of filing. You must submit to the court a copy of the certificate of completion and any payment plan you may have come up with during counseling. You may file for a 30-day waiver if there was a legitimate reason for not getting counseling.
If you are filing for bankruptcy in Ohio without a lawyer you will start by downloading the correct form for your district. You will use the same form whether filing bankruptcy under Chapter 7 or 13. The instructions on the petition will inform you of the other forms you need to file.
Ohio's federal court system is split between the Northern District and the Southern District. Each district operates its own bankruptcy courts. While the Northern District is headquartered in Cleveland and the Southern District in Cincinnati, there are divisional courts in most metropolitan areas.
Not all federal courthouses have a bankruptcy court, so before going. Searching under “U.S. Bankruptcy Courts" in the U.S. Court Locator is usually the easiest way to find the closest place to file.
The Northern District has courts in:
The Southern District has courts in:
In the Northern District of Ohio, the clerks for each divisional office require that you fill out and submit additional forms to accompany your petition. To see the forms required for each division, check out the Northern District's website.
The court filing fees for Chapter 7 bankruptcy are $338, and the Chapter 13 fee is $313. These fees must normally be paid at the time you file. However, you can ask to pay in installments or to waive the fee entirely.
To pay in installments, you must submit a Form 103A Application for Individuals to Pay the Filing Fee in Installments. The form includes a statement that you can only afford to pay in installments and layout a payment schedule. The proposed schedule cannot include more than four payments and the final installment must be within 120 days of filing the petition.
For the court to waive the fee, you must be unable to pay in installments and your income must be below 150% of the poverty line. You can request a fee waiver by filing a Form 103B application for a waiver. The judge may have you appear in court to answer questions.
The costs of filing for bankruptcy using an attorney can vary greatly, but some will file a simple Chapter 7 case for between $1,000 and $1,500. Since Chapter 13 cases are more complex, they will usually charge more than $3,000 for a simple filing.
Am I Eligible to File for Chapter 7 Bankruptcy in Ohio?
Not everyone in Ohio qualifies for Chapter 7 bankruptcy, so you need to determine whether you qualify before filing under that chapter. The means test compares your household income to Ohio's median household income, which was $58,642 in 2019. If you have income that is higher than the median amount, you may still qualify after subtracting allowed expenses. Check the U.S. Trustee's website for additional information on allowed expenses.
Need Help Filing for Bankruptcy in Ohio?
Personal bankruptcy was created to help ordinary people who have gotten into trouble with debt. Unfortunately, the process is usually too complicated for you to undertake on your own. This is why it is always a good idea to seek the assistance of a bankruptcy attorney in your area if you are having trouble managing your debt.
Not everyone who is having trouble with debt needs to file for bankruptcy. An attorney will help you decide if bankruptcy is the best option for you. An attorney will also help you determine whether Chapter 7 or 11 would allow you to keep the most assets under Ohio law.
State Bankruptcy Court Links:
Guides and Forms: Findlaw has partnered with U.S. Legal to provide bankruptcy guides and forms for Ohio.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.