Chapter 7 Bankruptcy Exemptions

Chapter 7 bankruptcy document on desk.

Understanding Chapter 7 Bankruptcy Asset Exemptions

One of the first questions asked when we first meet with clients is how much property they’re allowed to keep. Of course, the answer depends on the type of property you own, the value of the property, and the exemptions that apply to that property. Learn more about bankruptcy exemptions and how they affect your Chapter 7 bankruptcy.

Chapter 7 Bankruptcy Exemptions

When a debtor files Chapter 7 bankruptcy, the court appoints a trustee, who is given authority to sell your non-exempt assets to pay creditors. Filing for bankruptcy doesn’t necessarily mean that you’ll lose any of your property. The trustee cannot sell an exempt asset to pay your creditors.

Exemptions included in both federal and Ohio bankruptcy law allow you to keep a certain amount of property, giving you that “fresh start” we discussed on the What is Bankruptcy page. Because of the exemptions included in bankruptcy law, most debtors who file Chapter 7 bankruptcy keep all or most of their property.

How Much Property Can I Exempt?

Exemptions vary by state. The amount of property protected under Ohio law is covered in the chart below. Some states allow you to use federal exemptions, or choose between state or federal exemptions, but Ohio requires you to use Ohio exemptions.

You are typically allowed to keep a certain amount of equity in your house and personal property (like a car, retirement account, and wages). It’s rare that you’re allowed to exempt much cash or money in the bank. Also, most household goods and clothing usually are exempted unless they are extremely valuable.

How Do Exemptions Work in Chapter 7 Bankruptcy?

Part of the process of filing bankruptcy is accounting for all your property, and listing any property to claim any exemptions. When the value of a property is less than the allowed exemption, you are allowed to keep it. The trustee is allowed to sell any property not covered by an exemption, and use the proceeds to pay your creditors.

Sometimes, however, things can be much more complicated, such as if the exemption only partially covers a property. If you have secured debt like a car payment or mortgage, the creditor’s lien on the property ensures that the creditor gets paid first.

Property “Abandoned” by the Trustee

In some cases, you may not be able to fully exempt an asset, but if selling a piece of property won’t net a worthwhile amount, the trustee may decide to “abandon” it. Sometimes this happens when the value of the property is only slightly more than the amount of the exemption, after accounting for the costs and fees associated with selling it. When the trustee abandons the property, you are allowed to keep it.

Purchasing Property from the Bankruptcy Estate

If you have certain property that you’re unable to exempt, but you’d like to keep, the trustee may agree to let you purchase it at a discount; often the value of the asset less the fees and costs related to the sale. You’ll have to show the trustee that you are using funds for the purchase that aren’t a part of the bankruptcy estate, such as wages earned after filing, or a loan from a friend or family.

Exemptions in Ohio Allow Debtors to Retain Certain Property in Bankruptcy

In a Chapter 7 bankruptcy filing, you can protect some or all of your property with Ohio’s bankruptcy exemptions. The state’s exemptions also come into play with a Chapter 13 filing. Learn what types of property are included in Ohio’s bankruptcy exemptions.

Federal Exemptions Not Optional in Ohio

There are bankruptcy exemptions established by federal law but, like most states, Ohio has a list of their own exemptions. Other states may allow you to select which set of exemptions you wish to use in your bankruptcy case. Ohio, however, does not; you must use the state exemptions when you file bankruptcy in Ohio.

There also are federal non-bankruptcy exemptions, which protect certain property like military and federal retirement benefits.

Ohio Allows Couples to Double Exemptions

Filing a joint bankruptcy as a married couple has additional benefits: the couple may “double” the exemption amount, meaning they are each allowed to claim the full exemption amount. Filers may only claim exemption for property they own.

Bankruptcy Exemptions Commonly Used in Ohio

The following table is a list of the most commonly used bankruptcy exemptions in Ohio. References are to the Ohio Revised Code (unless otherwise indicated).

Amount Exemption Law
Homestead
– Value in one parcel of real or personal property (home, manufactured, or mobile home) that you or your dependent uses as a residence 2329.66(A)(1)(a)
Personal Property
– Cash on hand or deposit 2329.66(A)(3)
– Value in one motor vehicle 2329.66(A)(2)
– Value in household goods, such as furnishings and appliances 2329.66(A)(4)(a)
– Value in jewelry 2329.66(A)(4)(b)
– Interest in one burial lot 2329.66(A)(8)
Wages
75% Of wages 2329.66(A)(13)(b)
Pensions
– Private pensions 2329.66(A)(10)(b)
– Tax-exempt retirement accounts (401(k), 403(b), profit-sharing plans) 11 U.S.C. § 522
– IRAs and Roth IRAs 2329.66(A)(10)(c)
– Public employee retirement systems 3307.41
Amount Exemption Law
Public Benefits
– Crime victim's compensation received during 12 months before filing 2329.66(A)(12)(a); 2743.66(D)
– Disability assistance payments 2329.66(A)(9)(f); 5115.07
– Earned income tax credit and child tax credit 2329.66(A)(9)(g)
– Unemployment compensation benefits 2329.66(A)(9)(c)
– Vocational rehabilitation benefits 2329.66(A)(9)(a); 3304.19
– Workers’ compensation benefits 2329.66(A)(9)(b)
Wildcard
– value in any property 2329.66(A)(18)
Support
– Spousal or child support, to the extent reasonably necessary for support 2329.66(A)(10)(b)
Tools of the Trade
– value in implements, books, and tools of your trade, occupation, or business 2329.66(A)(5)
Miscellaneous
– 529 savings plans 2329.66(A)(10)(e) (corrected)

While this list includes some of the commonly used exemptions in Ohio law, there may be other exemptions available to a debtor to protect specific property.