Ohio Collection Laws

What are Ohio's collection laws, and what rights do creditors and debtors have in Ohio?

I have debt in Ohio, and I was told that Ohio has consumer protection laws that are not good for people. Exactly what rights do I have?

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Highlights


  • Ohio allows debtors to set up a payment plan to avoid garnishment.
  • Ohio's statute of limitations on credit card debt is not settled.
  • Deficiency balances may be collected in Ohio.

A collection agent or law firm that owns a collection account is a creditor. A creditor has several legal means of collecting a debt. But before the creditor can start, the creditor must go to court to receive a judgment. See the Bills.com resource Served Summons and Complaint to learn more about this process.

The court may decide to grant a judgment to the creditor. A judgment is a declaration by a court that the creditor has the legal right to demand a wage garnishment, a levy on the debtor's bank accounts, and a lien on the debtor's property. A creditor that is granted a judgment is called a "judgment-creditor." Which of these tools the creditor will use depends on the circumstances. We discuss each of these remedies below.

Ohio Wage Garnishment

The most common method used by judgment-creditors to enforce judgments is wage garnishment. A judgment-creditor contacts your employer and requires the employer to deduct a certain portion of your wages each pay period and send the money to the creditor.

n most states, creditors may garnish between 10% and 25% of your wages, with the percentage allowed determined by state law. Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law, but may be allowed for child support. See the Bills.com Wage Garnishment article to learn more.

In Ohio, wage garnishment is allowed under O.R.C. § 2716.07. If the judgment-creditor is aware of the debtor's place of employment, it may seek wage garnishment. Under Ohio law, the garnishment applies to 25% of the debtor's net take home pay, (i.e., gross pay less statutorily mandated deductions). Garnishment can occur only after the person being garnished has received a 10-day's notice.

However, under Ohio law, you also may contact a budget and debt counseling service described in division (D) of O.R.C. § 2716.03 for the purpose of entering into an agreement for debt scheduling. There may not be enough time to set up an agreement for debt scheduling to avoid a garnishment of your wages based upon this demand for payment, but entering into an agreement for debt scheduling might protect you from future garnishments of your wages. Under an agreement for debt scheduling, you will have to regularly pay a portion of your income to the service until the debts subject to the agreement are paid off. This portion of your income will be paid by the service to your creditors who are owed debts subject to the agreement. This can be to your advantage because these creditors cannot garnish your wages while you make your payments to the service on time.

Levy Bank Accounts In Ohio

A levy means that the creditor has the right to take whatever money in a debtor's account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state's laws to find if a bank account can be levied. Some states call levy attachment or garnishment.

In Ohio, levy is allowed under O.R.C. § 1304.80. As used in this section, "creditor process" means levy, attachment, garnishment, notice of lien, sequestration, or similar process issued by or on behalf of a creditor or other claimant with respect to an account. Under O.R.C. § 2329.66, $425 is exempt from account garnishment.

This applies to creditor process with respect to an authorized account of the sender of a payment order if the creditor process is served on the receiving bank. For the purpose of determining rights regarding the creditor process, if the receiving bank accepts the payment order, the balance in the authorized account is deemed to be reduced by the amount of the payment order to the extent the bank did not otherwise receive payment of the order, unless the creditor process is served at a time and in a manner affording the bank a reasonable opportunity to act on it before the bank accepts the payment order.

If you reside in another state, see the Bills.com Account Levy resource to learn more about the general rules for this remedy.

Ohio Lien

A lien is an encumbrance -- a claim -- on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinances the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment.

Under Ohio law, property liens are an allowable method available to a creditor for payment of debtor obligations. Please see O.R.C. § 118.20, Authorizing Debt Obligations, for a discussion on property liens. See also the reader comments below for a discussion on liens and foreclosure.

If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.

Ohio Statute of Limitations

Each state has its own statute of limitations. Ohio has the most creditor-friendly statutes of limitations in the country. According to O.R.C. § 2305.07 Contract not in writing, and O.R.C. § 2305.06, the statute of limitations for an oral contract is 6 years, a written contract is 8 years. Effective September 28, 2012, the statute of limitations decreased from 15 years to 8 years from the point when the statute of limitations clock starts.

When it comes to credit card accounts, some courts apply Ohio's "open account" statute of limitations, which is 6 years (O.R.C. § 2305.07). Other Ohio courts use the written contracts rule, which is 15 years for actions accruing before Sept. 28, 2012, and 8 years for actions accruing after Sept 28, 2012 (O.R.C. § 2305.06 as per SB 224). Others use Ohio's Retail Installment Sales Act, which sets the limit at 4 years (O.R.C. § 1302.98 and O.R.C. § 1317.01). This means that when a local court chooses a credit card statute of limitations, instead of relying on binding precedent from higher level courts (called stare decisis in the legal field), judges seem to apply the rule argued most persuasively by the two parties.

The Ohio Bar Association published a document indicating in passing the statute of limitations for Ohio credit card debt is 6 years, although this is not authoritative or a document one could cite to a court.

A judgment from an Ohio court is valid for 5 years, and then becomes dormant unless revived by the judgment-creditor (O.R.C. § 2329.07). Once dormant, the judgment-creditor has 10 years to revive an Ohio judgment (O.R.C. § 2325.18(A)). Ohio gives non-Ohio judgments full faith and credit after the foreign judgment is filed in an Ohio state court. Once filed, the time-limit rules for foreign judgments are the same as Ohio judgments (O.R.C. § 2329.021 through 2329.027).

The statute of limitations for recovering a deficiency balance relating to a mortgage foreclosure is 2 years, according to O.R.C. § 2329.08.

The statute of limitations for a promissory note is 6 years after the due date, or if accelerated, within 6 years after the accelerated due date (O.R.C. § 1303.16).

ollection agents violate the FDCPA if they file a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987) and Basile v. Blatt, Hasenmiller, Liebsker & Moore LLC, 632 F. Supp. 2d 842, 845 (2009)). Unscrupulous collection agents sue in hopes the consumer will not know this rule.

When does a statute of limitations clock start? Most states start the statute of limitations after the cause of action accrues. For debt-related issues, this usually means when you miss your first payment. See the Bills.com statute of limitations article to learn more about statutes of limitations.

Ohio Statutes of Limitations & Other State’s Statutes of Limitations

Ohio enacted a “borrowing statute” where if the default was prior to April 7, 2005, no cause of action that accrued in another state may be maintained in Ohio if the statute of limitations expired in the other state. This is important in lawsuits where creditors base the statute of limitations on a written contract that expressly designates its terms are governed by non-Ohio state law (O.R.C. § 2305.03(B)).

See the Bills.com resource Collection Laws and the Statute of Limitations for the rules in other states.

Ohio Post-Judgment Interest

If Ohio courts cannot find a post-judgment interest rate in the contract between the parties, they will use the statutory interest rate, which varies. Ohio Revised Code Chapter 1343 sets the statutory limitations to the interest that may accrue on written instruments and judgments. The Ohio judgment interest rate varies, and is set according to O.R.C. § 5703.47. The interest rate used for Ohio judgments, in cases where the rate is not set in the contract between the parties, is also the interest rate used for delinquent Ohio taxes. The Ohio tax commissioner publishes the Ohio Annual Certified Interest Rates.

The parties must make the calculation using simple interest on judgments unless there is a specific agreement or statutory provision requiring the payment of compound interest (Mayer v. Medancic, 124 Ohio St.3d 101, 2009-Ohio-6190).

Ohio Foreclosure Law

Ohio foreclosure laws are found in O.R.C. § 323.28. To learn more about the rules surrounding foreclosure in this state, including deficiency balances, please see O.R.C. § 5721.192. If the proceeds from a sale of a parcel under O.R.C. § 5721.19 or O.R.C. § 5723.06 are insufficient to pay in full the amount of the taxes, assessments, charges, penalties, and interest which are due and unpaid; the costs incurred in the foreclosure proceeding, the foreclosure and forfeiture proceeding, or both foreclosure and forfeiture proceedings which are due and unpaid; and, if division (B)(1) or (2) of O.R.C. § 5721.17 is applicable, any notes issued by a receiver pursuant to division (F) of O.R.C. § 3767.41 and any receiver's lien as defined in division (C)(4) of O.R.C. § 5721.18, the court may enter a deficiency judgment for the unpaid amount as authorized by O.R.C. § 5721.17, O.R.C. § 5721.19, O.R.C. § 5723.05, and O.R.C. § 5723.18.

Ohio Spousal Debt Liability

Ohio is not a community property state, so the general rule is one spouse not liable for the other spouse's separate debt, with the exception of medical debt.

Ohio follows the doctrine of necessaries for medical debt. In Ohio, the marriage contract creates mutual obligations of support, and the duty extends to both spouses (Ohio State Univ. Hosp. v. Kinkaid, 549 N.E.2d 517). Ohio courts and statutes establish liability for the medical debts of a debtor spouse when the debtor spouse is unable to pay the debt, to the extent the other spouse is able.

Recommendation

If you receive an Ohio summons for a consumer debt, read the Ohio Bar Association's Responding to a Debt Collection Lawsuit. Then consult with an Ohio attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Ohio.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

74 Comments

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  • MM
    Mar, 2013
    Matthew
    I received notification from an area court that a collection agency is attempting to collect an alleged debt from a state university from 1999 and 2002. In the documents the attorney filed with the court, all they provided as validity of debt were account print outs from the university. They haven't provided any written contract bearing my signature. My question is this: doesn't the plaintiff have to prove that I signed a contract agreeing to pay? Also, wouldn't alleged debts from 1999 and 2002 fall outside of the SOL in Ohio? I sent an answer both to the court and the attorney alleging that they cannot prove validity of the debt because they have no written contract with my signature. And since they cannot provide this, do they have any case at all?
    0 Votes

    • BA
      Mar, 2013
      Bill
      In general, you are correct — the defendant can challenge the existence of a contract between the parties. If the court determines there was no contract, the plaintiff has no case and the court will dismiss the case. How a defendant accomplishes this defense is the key.

      Consult with a lawyer in your state of residence who has civil litigation experience before you file any other answers with the court or communicate to the plaintiff.

      Regarding Ohio's statute of limitations, this changed recently. The new rule is the statute of limitations for Ohio contracts is 15 years for actions accrued before Sept. 28, 2012, and 8 years for actions accruing after that date (see Ohio Revised Code 2305.06 for details). Consult with a lawyer in your state to learn which Ohio statute of limitations applies to you. I believe it is the 15-year rule, but a lawyer can analyze your situation in person and in greater depth.
      0 Votes

  • HW
    Feb, 2013
    Helen
    If there is a foreclosure judgment against you in Ohio, but is not recorded against the property, does the five years/dormant ORC apply here?
    0 Votes

    • BA
      Feb, 2013
      Bill
      I do not have enough information to answer your question accurately.

      If you are asking, "Following a foreclosure in Ohio, does the lender (now a judgment-creditor due to a successful action filed against the borrower) need to perfect its judgment before can collect?" Yes, if it wishes to use the judgment to seize the judgment-debtor's personal property, such a vehicle. An Ohio judgment-creditor must give the judgment-debtor a 45-day notice before it can start garnishing wages.

      If you are asking, "What is the statute of limitations for an Ohio judgment? A judgment from an Ohio court is valid for 5 years, and then becomes dormant unless revived by the judgment-creditor. See Ohio Revised Code 2329.07 to learn specifics about this rule.

      If you are asking, "Does a non-perfected judgment follow ORC 2329.07 or have a different statute of limitations?" I do not see a separate rule for unperfected judgments, nor do I see in the ORC any mention of perfection starting the statute of limitations clock, or tolling for unperfected judgments. I hasten to add I am not an Ohio lawyer, and know nothing about Ohio's case law here. Therefore, your wisest course of action is to consult with an Ohio lawyer who has consumer law or bankruptcy experience.
      0 Votes

  • RB
    Nov, 2012
    Ramonda
    In Ohio, the ORC 2305.06, the statute of limitations on written contracts is now 8 years, effective 09/28/12, and was previously 15 years. I have a debt from a mobile home that my ex husband took possession of and was to take responsibility for in 1998, per our divorce decree. The trailer was repossessed in 2001, I believe. Has the SOL expired on this debt since ORC 2305.06 has changed? A third party collector tried to contact me.
    0 Votes

    • BA
      Nov, 2012
      Bill
      The state of Ohio’s Web site containing Ohio statutes published the following for Ohio Revised Code 2305.06:
      2305.06 [Effective 9/28/2012] Contract in writing

      Except as provided in sections 126.301 and 1302.98 of the Revised Code, an action upon a specialty or an agreement, contract, or promise in writing shall be brought within eight years after the cause of action accrued.

      R.C. § 2305.06
      Amended by 129th General Assembly File No. 135, SB 224, § 1, eff. 9/28/2012.
      When this statute of limitations applies is unclear from the statute alone. SB 224 is the law the Ohio legislature passed to change 2305.06. When we look back at SB 224, the intent of the Ohio legislature is clear. We find the following two sections in SB 224:
      SECTION 3. Subject to Section 4 of this act, section 2305.06 of the Revised Code, as amended by this act, applies to actions in which the cause of action accrues on or after the effective date of this act.

      SECTION 4. For causes of action that are governed by section 2305.06 of the Revised Code and accrued prior to the effective date of this act, the period of limitations shall be eight years from the effective date of this act or the expiration of the period of limitations in effect prior to the effective date of this act, whichever occurs first.
      Section 3 and 4 are not law, and it is unclear to me why the drafters of SB 224 did not include this language in 2305.06. However, when a court tries to interpret a law, they almost always research to find the legislative intent of the law. A low-level Ohio trial judge is free to ignore the two sections just quoted from SB 224, but he or she skates on thin ice by doing so. A higher-level appellate judge facing at a 2305.06 question will probably look to the legislative intent and SB 224 for guidance.

      What does this mean to you? It is likely an Ohio court will apply a 15-year statute of limitations for a breach of contract dispute on an action that occurred before September 28, 2012. In this context, an “action” is the date of first delinquency, which in your case occurred during or before 2001.
      0 Votes

  • KD
    Sep, 2012
    K
    Your article is not quite correct regarding the Statute of Limitations for collecting a deficiency balance from a foreclosure suit. You reference ORC 2305.04 as pertaining to the SOL for collecting a deficiency balance. In fact, that section only applies to recovering "title or possesion" of the property. (The SOL being 21 years after default occurs) If the home was ever used as the borrower's residence, a lender must take action to collect on a deficiency judgment within 2 years from the confirmation of sale date. (See ORC 2329.08)
    0 Votes

  • RW
    Sep, 2012
    Rebecca
    Capital One just won a judgement against me for 1000.00 with 3% interest. I have no job, I own my car, live in public housing, receive a medical card, food stamps, and 200.00 a month in child support. I just got married and my husband only makes 260.00 every two weeks to support 4 people. Can the debt collectors attorneys take my son's child support or my husbands wages? He has a separate bank account. Also can they take my car since I have owned it for years?
    0 Votes

    • BA
      Sep, 2012
      Bill
      Because you wrote your comment on a page discussing Ohio law, I will assume you are an Ohio resident. Wage garnishment law is set by federal law, but states are allowed to tighten the federal guidelines. In Ohio, no one may have more than 25% garnished from their wages (after deductions required by law). Any sum above 25% is protected from garnishment. That's the federal ceiling. There's also a federal wage garnishment floor Ohio follows, too. A wage earner is permitted to take home 30 times the federal minimum wage (after deductions required by law). This amount is protected from garnishment.

      The federal minimum wage as I write these words in mid-2012 is $7.70. A weekly wage of $7.70 x 30 hours is $231. If your weekly take-home pay (after deductions) is $231 or less, your wages up to $231 are exempt and may not be garnished. What is a permitted deduction? Taxes, but not voluntary contributions to a savings or retirement plan.

      Let us say your weekly wages are $500 after deductions. The amount that can be garnished is 25%, or $125. Ohio judges are not permitted to take into consideration the number of dependents, loss in family income, medical condition or medical bills, or divorce and order an amount less than what the law allows.

      You mentioned a vehicle. A debtor may exempt a motor vehicle up to $3,225 in value from creditors (Ohio 2329.66). If your vehicle market value is at or less than that amount, you need not worry about a judgment-creditor asking the sheriff to seize the vehicle.

      You mentioned child support. Child or spousal support is not a wage, and is therefore not subject to wage garnishment. However, if the support amount is considered beyond what is necessary to support the child or former spouse, a court has the option to allow a garnishment.
      0 Votes