The Ohio Homestead Exemption and Your Home’s Equity
For any homeowner facing financial difficulty, the most pressing question is often, Will I lose my house? The fear of losing your family’s primary residence is a significant source of stress.
Fortunately, Ohio law provides a powerful legal tool designed specifically to protect your home. The Ohio homestead exemption in Chapter 7 bankruptcy acts as a financial shield, safeguarding a large amount of the equity you have built in your property.
This legal protection is often the single most important factor that allows Ohio residents to file for debt relief without sacrificing their home.
The Hard Truth
- The Ohio homestead exemption protects up to $145,425 in equity for a single filer’s primary residence in a Chapter 7 case.
- Married couples filing a joint bankruptcy petition can double this protection, shielding up to $290,850 in home equity.
- This exemption applies to the owner’s equity, not the home’s total market value, making it highly effective for most homeowners.
- The exemption creates a legal and financial barrier that typically prevents a Bankruptcy Trustee from selling the property.
- Filing for bankruptcy also imposes an automatic stay, which provides immediate sheriff sale prevention by halting any active foreclosure proceedings.
What is Home Equity and How Does the Exemption Protect It?
Before diving into the specific numbers, it is crucial to understand the concept of equity. Equity is the portion of your home’s value that you actually own. It is the difference between the current fair market value of your house and the amount you still owe on your mortgage and any other liens.
- Fair Market Value of Your Home: The price your home would likely sell for in the current real estate market.
- Mortgage and Lien Balances: The total amount you still owe to your mortgage lender and any other creditors with a lien on your property (like a home equity line of credit).
- Your Equity: Fair Market Value – Mortgage/Lien Balances = Your Equity.
For example, if your home in a Columbus suburb is valued at $250,000 and you have a remaining mortgage balance of $180,000, your equity is $70,000.
The Ohio homestead exemption in Chapter 7 is applied directly to this $70,000 figure. As long as your equity is below the legal limit, your home is safe from the Bankruptcy Trustee.
This focus on equity is the key to equity protection in home bankruptcy. It means you can own a valuable home and still have it fully protected, as long as your mortgage balance is high enough to keep your equity within the legal exemption limits.
The Specific Dollar Amounts: Single vs. Joint Filers
The amount of protection provided by the Ohio homestead exemption is substantial. The state legislature has set a specific dollar amount that is adjusted periodically to account for inflation.
This ensures the protection remains meaningful for homeowners across the state. The current amount is established in the Ohio Revised Code Section 2329.66.
A critical aspect of the law is how it treats married couples.
When a married couple files for bankruptcy together, they can each claim their own full set of exemptions. This provides a significant advantage for protecting their home.
Filer Type | Homestead Exemption Amount | Total Equity Protected |
| Single Filer | $182,625 | $182,625 |
| Joint Filing (Married Couple) | $145,425 per person | $290,850 |
This doubling of the joint filing homestead amount means that a married couple can protect nearly $300,000 of equity in their primary residence. This amount is more than enough to cover the equity for the vast majority of homeowners in Ohio, from Cleveland to Cincinnati.
This powerful protection is a cornerstone of the fresh start that bankruptcy provides.
How the Exemption Creates a Legal and Financial Barrier
The primary job of a Chapter 7 Bankruptcy Trustee is to liquidate, or sell, non-exempt assets to pay creditors. However, the trustee is also a professional who must make practical financial decisions.
The homestead exemption creates a powerful barrier that makes selling a person’s home impractical and unprofitable in most cases.
Here is the thought process a trustee must go through before deciding to sell a property:
- Calculate the Equity: The trustee first verifies the home’s market value and subtracts all mortgage and lien balances to determine the exact equity.
- Apply the Exemption: The trustee then subtracts the full amount of your homestead exemption from the equity.
- Estimate Sale Costs: The trustee must account for the significant costs of a sale, including real estate commissions, closing costs, and their own fees, which can easily total 8-10% of the sale price.
- Determine Creditor Payout: Only after all mortgages, liens, sale costs, and your exemption amount are paid is there any money left over for the unsecured creditors (like credit card companies).
If this final calculation shows that there will be little or no money left for creditors, the trustee will not sell the house. They will formally “abandon” the property, which means it remains yours.
The Ohio homestead exemption in Chapter 7 is so generous that for most people, it leaves no remaining equity for the trustee to administer. This financial reality is the core of how the exemption functions as a legal barrier.
It removes the financial incentive for the trustee to take any action against your home.
Sheriff Sale Prevention and the Automatic Stay
Many people who are considering bankruptcy are also facing the immediate threat of foreclosure. A foreclosure is the legal process lenders use to repossess a home, which in Ohio culminates in a sheriff sale where the property is auctioned off. Filing for bankruptcy provides an immediate and powerful tool for sheriff sale prevention.
The moment your bankruptcy petition is filed with the court, a federal protection called the automatic stay goes into effect.
- The automatic stay is a court order that immediately halts all collection actions against you.
- This includes stopping any pending foreclosure lawsuit or scheduled sheriff sale.
- This protection gives you breathing room to address your financial situation without the immediate danger of losing your home.
While the automatic stay provides the immediate stopgap, the homestead exemption provides the long-term protection within the bankruptcy case itself. The stay stops the foreclosure, and the exemption prevents the Bankruptcy Trustee from selling the property instead. Together, they provide a comprehensive defense for your home.
What if My Equity is Higher Than the Exemption Limit?
While the Ohio homestead exemption is generous, there are situations where a homeowner’s equity might exceed the protected amount. This is most common for people who have lived in their homes for many years, have paid down their mortgage significantly, or live in an area with rapidly appreciating property values, like some neighborhoods in Dayton or the suburbs of major cities.
If you have non-exempt equity, the trustee has a few potential courses of action:
- The Trustee Sells the Home: The trustee can proceed with selling your property. After the sale, you would receive a check from the trustee for the full amount of your homestead exemption ($145,425 or $290,850). You could then use these funds as a down payment on a new home.
- You Buy Out the Equity: The trustee may agree to let you keep the home if you can pay the non-exempt portion to the bankruptcy estate.
- Consider Chapter 13: If you have significant non-exempt equity, a Chapter 13 bankruptcy may be a better option. Chapter 13 is a repayment plan that allows you to keep all of your property, including assets with high equity, in exchange for paying back a portion of your debts over three to five years.
Having non-exempt equity does not automatically mean you will lose your home. It simply means you have a more complex situation that requires careful legal strategy and planning.
FAQs: Ohio Homestead Exemption in Chapter 7
When dealing with your most valuable asset, it is normal to have specific questions about how the law applies to your unique situation.
Can I use the homestead exemption for a mobile home or condominium?
Yes, the Ohio homestead exemption applies to your “residence,” which can include a house, a mobile or manufactured home, a condominium, or a co-op. The key requirement is that it must be the property you use as your primary home. You cannot use it to protect a vacation home or a rental property.
What if I own my home but have not lived in Ohio for very long?
Bankruptcy law has specific residency rules to determine which state’s exemptions you can use. To use Ohio’s exemptions, you generally must have been domiciled in Ohio for the 730 days (two years) before filing. If you moved to Ohio more recently, the rules become more complex, and you may have to use the exemptions of the state you previously lived in.
Do I need to file any special paperwork to claim the exemption?
You claim the homestead exemption as part of your main bankruptcy petition paperwork. There is a specific form called Schedule C: The Property You Claim as Exempt where you list your home, its value, and the specific Ohio law (O.R.C. 2329.66(A)(1)) that gives you the right to the exemption. Properly completing this form is essential.
Can the homestead exemption protect my home from all types of creditors?
The homestead exemption is extremely powerful against general unsecured creditors like credit card companies and medical bills. However, it does not remove voluntary liens that you have placed on the property.
This means you must continue to pay your mortgage if you want to keep your home. It also may not protect you from certain government debts like tax liens.
What if my name is not on the deed to the house where I live?
To claim the homestead exemption, you must have an ownership interest in the property. If you live in a home that is owned by your parents or another relative but your name is not on the deed, you cannot use your homestead exemption to protect it because you do not legally own it.
Does the value of my home for the exemption mean the tax assessed value?
No, the value used for bankruptcy purposes is the home’s current fair market value, which is what a buyer would realistically pay for it today. This can be higher or lower than the value assessed by your county for property tax purposes.
It is important to use a realistic market value, which can be determined from recent sales of similar homes in your neighborhood or a real estate agent’s opinion.
Get Help Protecting Your Home
Understanding how the law protects your home is the first step toward finding peace of mind. At Amourgis & Associates, Attorneys at Law, we are a consumer-focused firm that fights for regular people.
We never represent businesses or insurance companies because our mission is to help individuals and families who are facing difficult times. We know that your home is more than just a building; it is the center of your life, and we are here to help you protect it.
Our team knows that you have enough on your plate. We make the legal process easy and take the pressure off you. We will evaluate your case from every angle, give you direct and honest answers, and explain all the ways we can help you achieve a fresh start.
We treat your situation with the urgency it deserves and work quickly to find the best solution for you.
Contact Amourgis & Associates, Attorneys at Law Today
If you are ready to learn more about the Ohio homestead exemption and how to protect your most important asset, contact our law firm today to get the legal help you need in a free consultation.
We are always available to you by phone, text, or email. Our attorneys can meet with you remotely or at any location that is convenient for you. With offices in Cleveland, Akron, Canton, Toledo, Columbus, Cincinnati, and Dayton, we serve communities across the entire state of Ohio.
