24 Dec Ohioans Dancing Jig Over Homestead Jump
Ohio residents will be soon be able to protect almost six times more equity in their homes and exempt 529 education savings plans and inherited IRAs under a new law signedby GovernorJohn R. KasichonDecember 20, 2012.
“This bill will be causing lot of debtors’ bankruptcy counsel to be dancing the jig on St. Paddy’s Day,” said Wayne Novick, Centerville OH bankruptcy attorney, (the bill will be effective around March 20, 2013).”
“First and foremost the homestead exemption will increase to $125,000 (from $21,625)allowing individuals to protect the equity in their home from the creditors, Novick said. “It also clarifies that inherited IRA are exempt.It protects 100% of the 529 accounts. These are changes necessary to give individuals the fresh start that they need.”
Novick cautioned, “debtors’ counsel need to be aware that the protection from creditors does not apply when a judgment is entered against a debtor who failed to main proof of financial responsibility. This will create timing issues.”
The legislationwas “championed by Republican lawmakers who supported the legislation as instrumental to creating a favorable small business climate in the state,” according to William Brewer, President of the National Association of Consumer Bankruptcy Attorneys (NACBA).
“A hearty congratulations to NACBAâ€™s Ohio state chairs, Richard Nemeth and Wayne Novick, and to Brian Flick, NACBA Advocate Leader, for their involvement in this successful effort,” Brewer said. “They are an inspiration to all of us who seek to make the bankruptcy system more fair and effective for our clients.”
Exempting Property in Bankruptcy
What is exempt from creditors, what law applies in any individual bankruptcy case, and how the exemptions are calculated is very tricky business that is best left to an experienced bankruptcy attorney. You can lose your property if exemptions are not correctly claimed. Timing is important, too. This is particularly true when the Ohio homestead law is increasing six fold in March or other laws are changing or if you have moved from state to state in the past four years. See your bankruptcy lawyer to determine what exemption laws apply to you.
Ohio Homestead Exemption
The law increases the Ohio homestead exemption limit from $21,625to $125,000 forone parcel of property that a person or person’s dependent uses as a residence. This is the second increase in the homestead exemption in four years.
(1)(a) In the case of a judgment or order regarding money owed for health care services rendered or health care supplies provided to the person or a dependent of the person, one parcel or item of real or personal property that the person or a dependent of the person uses as a residence. Division (A)(1)(a) of this section does not preclude, affect, or invalidate the creation under this chapter of a judgment lien upon the exempted property but only delays the enforcement of the lien until the property is sold or otherwise transferred by the owner or in accordance with other applicable laws to a person or entity other than the surviving spouse or surviving minor children of the judgment debtor. Every person who is domiciled in this state may hold exempt from a judgment lien created pursuant to division (A)(1)(a) of this section the person’s interest, not to exceedtwentyone hundred twenty-fivethousandtwo hundreddollars, in the exempted property.
(b) In the case of all other judgments and orders, the person’s interest, not to exceedtwentyone hundred twenty-fivethousandtwo hundreddollars, in one parcel or item of real or personal property that the person or a dependent of the person uses as a residence.
(c) For purposes of divisions (A)(1)(a) and (b) of this section, “parcel” means a tract of real property as identified on the records of the auditor of the county in which the real property is located.
Driving Without Insurance Exception
The law creates an exception to the homestead exemption for a personal injury judgment against a debtorfor “tortious operation of a motor vehicle if theresulting injury, death, or loss to person or property was caused when the debtorfailed to maintain proof of financial responsibility.”
529 Accounts Exempt
The new lawexempts certain payments orbenefits undera 529 plan.A529 planis an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. Known as â€œqualified tuition plansâ€, 529 plans have tax advantages. They are named after Section 529 of the Internal Revenue Code.
Inherited Retirement Accounts
The exemption for anindividual retirement account, individual retirement annuity,”Roth IRA,” “529 plan,” or education individual retirement account is extended to “inherited” accounts.
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