Does the Ohio homestead exemption law really protect the equity in your residence from creditors? This is the question that bankruptcy attorneys in the know, trustees, and quite a few creditor lawyers have been asking since the law passed.
How could this be an issue? The law says that the exemption is $125,000 and the cost of living provision kicked it up to $132,900 April 1, 2013. Fast forward to 2017. The cost of living adjustments have kicked it up to $136,925. The enactment (not a part of the statute) had an odd little provision, which had never been seen before in a law passed by the Ohio General Assembly:
The amendments made by this act to sections 2329.66 and 2329.661 of the Revised Code shall apply to claims accruing on or after the effective date of this act…This act is not intended to impair any secured or unsecured creditors’ claims that accrue prior to the effective date of this act.
Talk about lawyer speak! No one had any idea what this meant. Could it possible mean that it really only applies to claims that accrue after March 27, 2013? What sense would that make, and what do they mean by the word, ‘claims’?
It didn’t take long for a creditor to try to defend its judicial lien in a lien avoidance action using this language. After little more than 4 months from the effective date of the law, Ashtabula Bankruptcy Judge Kay Woods wrote a well reasoned opinion settling the issue for now in her corner of the Northern District of Ohio.
Let me digress a moment. I am not referring to her opinion as well reasoned because it turned out favorable to debtors. Bankruptcy judges impress me as true students of the law. The selection process yields a select, scholarly group. I often run across well reasoned opinions. Unfortunately, many times they are contrary to the position I am arguing.
In a thirty-two-page opinion in which she attacked the problem from all sides, Judge Woods held that a debtor is entitled to claim the Homestead Exemption in the amount of $132,900, which is the amount in ORC 2329.66(A)(1) in effect as of the Petition Date. There is no lesser amount if the lien was filed prior to the effective date of the new Ohio homestead exemption.
I suspect the intensity with which she attacked the issue was an effort to put it to rest. At the present time creditor attorneys are attacking the homestead exemption to preserve judicial liens for their clients
Chapter 7 trustees are using the same approach to object to a debtors’ claim of exemption in residence real estate. If they prevail, they might force the sale of your home to distribute the equity to the unsecured creditors.
The first battle, and possibly the war, was fought in Ashtabula Bankruptcy Court, and was won by you and the debtors’ bar.