Ohio Bankruptcy Court Permits Application of New Hampshire Homestead Exemption to Ohio Residence

The Bankruptcy Court for the Southern District of Ohio recently held that the Bankruptcy Code’s application of New Hampshire’s homestead exemption to an Ohio residence following the debtors’ move from New Hampshire to Ohio was constitutional.

In the case of In re Varanasi ¹, the debtors, a husband and wife, moved from New Hampshire to Ohio shortly before filing their bankruptcy petition. Under the Bankruptcy Code, New Hampshire law applied to the debtor’s exemptions because the debtors had not lived in Ohio for two years prior to the filing of the bankruptcy petition. The Chapter 7 trustee, however, argued that the Bankruptcy Code was unconstitutional to the extent that it required the application of New Hampshire’s $100,000.00 homestead exemption rather than Ohio’s far less generous homestead exemption to the debtors’ Ohio residence.

The court rejected the trustee’s argument, holding that the Bankruptcy Code’s application of New Hampshire’s homestead exemption was constitutional. Specifically, the court held that the explicit language of New Hampshire’s exemption law did not limit the application of that law to property located in within New Hampshire. Further, the court held that the Bankruptcy Code’s provision requiring the debtors to live in Ohio for a certain length of time before claiming exemptions under Ohio law did not violate the requirements of due process or equal protection, the Takings Clause, the Uniformity Clause, or the Contract Clause. For these reasons, the debtors were permitted, due to their status as former citizens of New Hampshire, to seek the protection of New Hampshire’s homestead exemption for property located in Ohio. While it is unlikely that this decision will affect debtors’ pre-petition decisionmaking, the court’s decision in this case permits the application of non-Ohio exemptions in a number of Ohio bankruptcy cases where debtors’ claimed exemptions would otherwise be governed by Ohio law.

Posted by: Matthew J. Horwitz

Categories: Bankruptcy & Banking Law