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What is - and Isn't - Exempt in Bankruptcy

  • People often put off considering bankruptcy as a form of debt relief because they are afraid of losing what they own. On the contrary, filing for bankruptcy may offer a legal way to keep most, if not all, of your possessions.  It can also free you of harassment from creditors, and the threat of repossessions, foreclosure, wage garnishment or bank account levies, while providing a fresh financial start.


    What Can I Keep?

    It’s natural to worry about what you will be able to keep after going through bankruptcy.  The good news is that there are both state and federal bankruptcy exemptions, which enumerate assets that a bankruptcy filer is allowed to set aside and keep out of reach of the bankruptcy court’s management. Also, Ohio offers some of the most generous exemptions available.

    Exemptions are handled differently, depending on the type of bankruptcy you file.

    1. Chapter 7 bankruptcy— In Ohio, if you file for Chapter 7, which is a liquidation plan, you can automatically keep property that is protected by Ohio’s bankruptcy exemptions. While your bankruptcy trustee will liquidate nonexempt assets to pay creditors, if you do not own a great deal of property, your possessions may all be exempt, qualifying you for a “no asset” case, and you can wind up keeping everything.
    1. Chapter 13 bankruptcy— If you file for Chapter 13, which is a reorganization and repayment plan, your bankruptcy exemptions will affect how much you pay to creditors through the plan.  You may get to keep the vast majority of your assets if you make the agreed-upon payments.

    You must use Ohio’s exemptions if you file a bankruptcy in Ohio. In addition to Ohio’s bankruptcy exemptions, under certain circumstances you may use any of the federal nonbankruptcy exemptions.  These protect property such as federal and military retirement benefits.

    If you are married and filing jointly for bankruptcy, you can double the Ohio exemptions allowed. While married people can each claim the full exemption amount for any property they own together, if property belongs only to one or the other spouse, only the owner may file an exemption for that property.


    What Are Ohio Exemptions?

    Some of the most commonly used exemptions in our state include:

    • Homestead -- You can keep a fixed amount in one parcel of real or personal property you or your dependent uses as a residence, including a house, manufactured, or mobile home. You must remain current on your mortgage payments.
    • Personal Property -- This includes cash and the value of one motor vehicle, household goods, jewelry, etc.
    • Wages -- A set percentage of your wages are exempt.
    • Pensions -- You may keep income you receive from private pensions, tax-exempt retirement accounts (401(k), 403(b), and profit-sharing plans), IRAs, Roth IRAs up to a certain amount, and state teacher retirement.
    • Benefits – Protected benefits include: workers’ compensation benefits, disability assistance payments, unemployment compensation benefits, vocational rehabilitation benefits, crime victim’s compensation received during 12 months before filing, and earned income tax credit and child tax credit.
    • Wildcard -- Ohio’s wildcard benefit allows you a fixed amount of value in any property.
    • Support -- You may keep spousal or child support that is reasonably necessary for support.
    • Tools of the Trade – You can keep a fixed amount of value in implements, books, and tools of your trade, occupation, or business.
    • Miscellaneous -- There are additional exemptions available to protect specific property.

    Ohio updates exemptions every three years, with the next update scheduled for April 2019. You can find the current exemption amounts at the Ohio Legislature website. 


    What About Non-Exempt Property?

    If you own property, either real or personal, that exceeds the value of the allowable exemptions, then what happens to that property depends on which type of bankruptcy you file. In a Chapter 7 bankruptcy, any property you own that is not exempt can be sold by the bankruptcy trustee in order to liquidate your property to pay back your creditors. In a Chapter 13 bankruptcy, non-exempt property is calculated into your monthly chapter 13 repayment amount.

    An experienced Ohio bankruptcy attorney can help examine your specific exemption situation and ensure that you get to keep as much of your assets as possible. Attorney Tom Fesenmyer has many years of experience and can guide you in the right direction.