The Ohio legislature approved a huge increase in the Ohio homestead exemption. As of April 1, 2013, the amount that homeowners can exempt in Chapter 7 bankruptcy is $132,900. This is up from $21, 625. Ohio increased the amount of other exemptions as well.
How Does the Homestead Work in Bankruptcy?
If you file for Chapter 7 bankruptcy in Ohio, the homestead exemption allows you to protect a certain amount of equity in your property. If you have a significant amount of equity in your home that is not protected, the bankruptcy trustee can sell your home and use the unprotected equity (called nonexempt equity) to repay your unsecured creditors.
(To learn more about how the homestead exemption works, see Nolo’s article The Homestead Exemption in Bankruptcy.)
What Does the Ohio Homestead Exemption Increase Mean?
Now that the Ohio homestead exemption protects a significantly larger amount of home equity, if you file for bankruptcy and have equity in your home, you are more likely to be able to keep it.
Example (old law). Let’s say your home is worth $450,000 and the principal balance on your mortgage is $350,000. In this scenario, your home equity would be $100,000. Under the old Ohio exemption ($21,625), you’d have almost $80,00o of unprotected equity. The bankruptcy trustee would sell your home, pay off your mortgage, pay you $21,625, and divide the rest among your unsecured creditors.
Example (new law). In the same scenario, the Ohio homestead exemption ($132,900) would protect the entire amount of your $100,000 equity. You would keep your home in Chapter 7 bankruptcy.
Other Ohio Exemption Increases
Ohio increased the amount of other exemptions as well. For example, the motor vehicle exemption increased from $3,450 to $3,675.
To find all of the Ohio exemptions amounts, see Nolo’s article Ohio Bankruptcy Exemptions.