Beginning March 27 of this year, the Ohio homestead exemption was given a huge increase. The state legislature approved increasing the exemption from $21,625 to $132,900. This increase is significant to homeowners filing Chapter 7 bankruptcy, and should result in more people being able to keep their homes.
How Homestead Exemption Works
Homestead exemption refers to the amount of equity in your home that is protected during the bankruptcy process. If a large amount of your equity is unprotected, your home can be sold and the unprotected or nonexempt equity will go to pay off your unsecured debts.
Effects of the Law
Simply put, the new legislation increases the amount of protected equity to $132,900, making it more likely you could keep your home. Here’s an example. If you have a home with a market value of $350,000 and you still owe $250,000, your home equity is $100,000. Under the old law, only $21,625 of that $100,000 would be protected equity, leaving you with $78,375 in unprotected equity. A bankruptcy trustee would legally be able to sell your home to pay off the mortgage and your unsecured creditors. You would be left with only what was exempt under the law, $21,625. However, under the new law your entire $100,000 in equity would be protected through homestead exemption since the maximum amount is now $132,900. In this scenario you would get to stay in your home.
While there are strict laws governing bankruptcy, it’s important to know you do have options. Mortgage lenders and creditors are very familiar with how to use the system. Hire an Ohio bankruptcy attorney and get an advocate on your side. The Chris Wesner Law Office is dedicated to helping individuals and small businesses with an effective debt relief strategy. Contact us for a free consultation.