Ohio Exemption Law effective September 30, 2008.

OHIO EXEMPTIONS LAW INCLUDING THE RECENT AMENDMENTS

By Lester R. Thompson

The tables on the following pages are an attempt to provide the legal community with a useful document that contains at least basic information with regard to property that is exempt in bankruptcy cases and in other cases from execution under the laws of the state of Ohio or applicable federal laws.

Table 1 summarizes the exemptions changed by Amended Ohio Senate Bill 281, which became law on July 1, 2008 and will be effective September 30, 2008.  In the left-hand column are the amended provisions of Ohio Revised Code section 2329.66(A), beginning with subsection one and listing the other subsections that were amended in order.

The first change is found in Subsection (1), residential property.  Residential property is property actually occupied by the debtor or a dependant as their principal place of residence on the date of filing the bankruptcy case.  Typically it is real estate, but it can also be a mobile home.  The exemption increases from $5,000 per debtor to $20,200 per debtor in one item.  A husband and wife who are both in title and occupy the residential property on the date of filing would have a total of $40,400 in exemptions.

Another significant change is found in Subsection (2) with regard to motor vehicles.  The exemption increases from $1,000 to $3,225.  This exemption is not in the aggregate and can only be used on one vehicle.  A husband and wife who are both listed as owners on the title for a motor vehicle could each apply their exemption to the same motor vehicle.

Subsection (4)(a) has seen a significant change as the exemption for household goods increases to $10,775 in aggregate.  This is an increase of more than $8,000 above the maximum previously permissible exemption.  Because this is an aggregate exemption, it may be divided however the debtor determines best, the only limitation being that no particular item to which the exemption is applied may exceed a value of $525.  In general there should not be a problem under the Bankruptcy Code, because the applicable value would be what the item would change hands for between a willing buyer and a willing seller in its then-current condition.  This amount is much higher than what it would have been under the previous bankruptcy law, which essentially valued household goods at garage sale value.  In my practice I've encountered very few clients who have more than $10,000 in aggregate value in household goods.  Most clients who do have this much value in household goods typically have substantial incomes and are in Chapter 13 plans that pay back 100 percent of their unsecured debt.  For the uninitiated, a 100 percent payback plan allows the debtor to retain all of their assets.

Subsection (4)(b), regarding jewelry, greatly simplifies the exemption to $1,350 in aggregate.  This allows the debtor to divide the exemption among their jewelry, as they deem most appropriate.

Subsection (5) deals with implements of trade, including tools, books and other items that an individual might use for the purpose of making a living.  The change in this exemption is simple, increasing from $750 to $2,025 in aggregate.

Subsection (9)(g) is the only truly new exemption.  It exempts 100 percent of the Child Tax Credit and the Earned Income Tax Credit.  References to the appropriate sections of the United States Code can be found in Table 1.  These are really two separate exemptions, although they are referred to in the same subsection of the Ohio Revised Code.  These exemptions are extremely important because they protect what are essentially government transfer payments to families of extremely limited means from being taken by Chapter 7 trustees.  As I am sure most of you know, these two items make up the bulk of the federal income tax refunds received by the poorest clients.

Subsection (12)(c) increases the exemption for personal bodily injury payments to $20,200 in aggregate.  A detailed explanation regarding application of the statute is beyond the scope of this article.  Those who practice in this area of law should familiarize themselves with the cases cited in Table 1, as it is a very complex area of law.

Subsection (18) is the general or wildcard exemption, which increases to $1,075 in aggregate.  This exemption can be combined with other exemptions to increase the overall exemption available with regard to a particular piece of real or personal property.  The most classic example is with motor vehicles, where a debtor could use the new $3,225 vehicle exemption, combined with the $1,075 general or wildcard exemption for a total exemption of $4,300 for a particular vehicle.

The Ohio exemptions unchanged by Amended Senate Bill 281 are set forth in Table 2.  They are listed numerically, in order of subsections that have not already been addressed in this article.  The most important thing to note is that there is no change to the exemption for Cash on Hand, with the exemption remaining at $400 in aggregate.  This exemption, however, can be combined with the general exemption.

There are two other provisions found in Table 2 that are unchanged, but seem to be misunderstood.  The first of these is Subsection (13).  This exemption allows the debtor to exempt up to 75 percent of their personal earnings from execution, including personal earnings deposited in a bank account which do not lose their exempt status so long as the source of the funds is known or reasonably traceable.  This can greatly increase the amount of cash on hand that can be effectively exempted.  It is imperative to have accurate records so that the exempt amount can be readily proven to the trustee.  By combining the Personal Earnings exemption, the Cash on Hand exemption and the General exemption, the total amount of cash on hand that might be exempted could be as much as $5,900.00.  This amount is arrived at by using the personal earnings exemption of 75 percent or $4,425 combined with the Cash on Hand exemption of $400, and the general exemption of $1,075.  While the Chapter 7 trustee will likely object to this, under the case of Daugherty v. Central Trust Company, 28 Ohio St. 3d 441 (1986) and the definition of “personal earnings” found in Ohio Revised Code section 2716.01, you would be on strong grounds assuming you had the evidence available to prove your position.  This same tracing method would work for other exempt funds such as Social Security proceeds and many others.

Subsection (14) is another very curious exemption dealing with partnership property.  If you read the case law cited in Table 2, I believe that you will conclude as I did, that partnership property is exempt, but that the partner’s interest in the partnership property is not exempt.  Accordingly, although the trustee could probably not take the partnership property of a bankrupt partner, that partner's interest in the partnership could be sold or in a Chapter 13 would have to be considered when calculating the best interest of the creditor's test.

In Table 3 are the exemptions amended in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act.  These exemptions are extremely important because they deal with the right of honest debtors to retain their retirement funds, so long as they are held under one of the applicable federal laws set forth in Table 3.  The only limitation is for IRAs, where the aggregate amount may not exceed $1,095,000, not including any rollover contributions.  The court is, however, granted the right to increase this amount were justice so requires.  It would seem that under these federal provisions and the applicable Ohio exemption provisions found in Subsection (10) of Table 2, virtually all pensions will be protected in bankruptcy or otherwise.

Finally, we come to Table 4.  These exemptions list the federal non-bankruptcy exemptions that are made available to Ohio debtors under Subsection (17).  While there are no changes to any of these exemptions, it seemed useful to gather all of the appropriate exemptions together for ease of future use.

In closing I would like to give credit to those who have worked diligently for many years to bring our exemptions in line with what is typical in other states.  In particular I would like to thank Senator Bill Seitz and his assistant Erika Cybulskis.  I would also like to give credit to Barber Adelman, Richard Nemeth and many other members of the National Association of Consumer Bankruptcy Attorneys for their unwavering dedication in seeking fair and equitable exemption laws for all Ohioans.

Exemptions Changed under Amended Ohio Senate Bill 281

(Table 1)

Exemptions Unchanged By Amended Ohio Senate Bill 281

(Table 2)

Federal Bankruptcy Exemptions

(Table 3)

Federal Non-Bankruptcy Exemptions

(Table 4)

O.R.C. § 2329.66(A)(17)

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