On December 20, 2012, Governor Kasich signed into law Am. Sub. H.B. 479 (Act), which becomes effective on March 27, 2013. The Act, among other things, makes certain changes to Ohio’s exempt property statute, modifies the Ohio Uniform Fraudulent Transfers Act, clarifies the secured transactions recording law, and prohibits a post-closing solvency covenant from being used as a nonrecourse carveout in nonrecourse loans.
Revisions to Ohio Revised Code section 2329.66
Section 2329.66 of the Ohio Revised Code lists types of property that persons domiciled in Ohio may hold exempt from execution, garnishment, attachment, or sale to satisfy a judgment or order.1 Most of the property exemptions are created within section 2329.66, but a few of the exemptions are created in other revised code sections or in federal statutes and incorporated by cross-reference in section 2329.66. Under section 2329.662 of the Ohio Revised Code, the property exemptions are applicable in bankruptcy proceedings to persons domiciled in Ohio who are debtors. The following chart illustrates revisions to section 2329.66(A) impacting property used as a residence:
Statutory Amount (applies to judgments and orders prior to March 27, 2013)2
Statutory Amount (applies to judgments and orders on or after March 27, 2013)
(A)(1)(a) exempted property (for health care services or health care supplies)
(A)(1)(b) personal residence
The Act provides that the above exemptions of property used as a residence do not extend to a judgment rendered against a debtor for tortious operation of a motor vehicle by the debtor that results in injury, death or loss to person or property if that injury, death or loss was caused at a time when the debtor failed to maintain proof of financial responsibility.3
The Act also adds new subsection 2329.66(A)(10)(e) to specifically exempt a person’s rights to or interests in any assets held in, or to directly or indirectly receive any payment or benefit under, any individual retirement account, individual retirement annuity, Roth IRA, 529 plan, or education retirement account that a decedent, upon or by reason of the decedent’s death, directly or indirectly left to or for the benefit of the person, either outright or in trust or otherwise.4
Revision to the Ohio Uniform Fraudulent Transfers Act
The Act modifies the Ohio Uniform Fraudulent Transfers Act by providing that a transfer made or an obligation incurred by a debtor is fraudulent as to a creditor, whether the claim of the creditor arose before, or within a reasonable time not to exceed four years after, the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation in either of certain ways, including with actual intent to hinder, delay or defraud any creditor of the debtor. The new language is italicized.5 The Act provides that the amendments made to Revised Code section 1336.04 apply to transfers made on or after the Act’s effective date (March 27, 2013).
Recording public records under the Uniform Commercial Code
The Act clarifies that the recording with any county recorder of any document under continuing law or the Act, or the filing or recording with the Ohio Secretary of State of any document which is required or allowed under Chapter 1309 of the Ohio Revised Code (Uniform Commercial Code – Secured Transactions, as the same may be amended from time to time) is constructive notice to the whole world of the existence and contents of either document as a “public record” and of any transaction referred to in that public record, including any transfer, conveyance or assignment reflected in that record.6
New prohibition regarding postclosing solvency covenants in nonrecourse loans
The Act provides that a postclosing solvency covenant may not be used, directly or indirectly, as a nonrecourse carveout or as the basis for any claim or action against a borrower or any guarantor or other surety on a nonrecourse loan. Provisions in nonrecourse loans to the contrary are invalid and unenforceable.7 The Act does not prohibit a loan that is secured by a mortgage on real property located in Ohio from being fully recourse to the borrower or guarantor, including, but limited to, as a result of a postclosing solvency covenant, if the loan documents for that loan do not contain nonrecourse loan provisions.8 “Postclosing solvency covenant” means any provision of the loan documents for a nonrecourse loan, whether expressed as a covenant, representation, warranty, or default, that relates solely to the solvency of the borrower, including, without limitation, a provision requiring that the borrower maintain adequate capital or have the ability to pay the borrower’s debts, with respect to any period of time after the date that the loan is initially funded.9
1O.R.C. § 2329.66(A)
2These amounts have not been adjusted for inflation based on the consumer price index.
3O.R.C. § 2329.661(A)(5)
4O.R.C. § 2329.66(A)(10)(e)
5O.R.C. § 1336.04(A)(1)
6O.R.C. § 1301.401
7O.R.C. § 1319.08
8O.R.C. § 1319.09
9O.R.C. § 1319.07
For more information, please contact:
Scott N. Opincar 216.348.5753
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