- 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.
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?
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.
Learn the Right Way to Handle a Collection Call
Call 800-998-7497 to speak with a Money Coach. Discuss what to say and not to say in a phone call with a debt collector. Make a financial plan to avoid having this kind of problem again.
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.
Protect Yourself Against Wage Garnishment
In 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.
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.
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).
Know Your Rights - Collection Agents
Collection 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.
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.
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Dealing with debt
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q2 2023 was $17.06 trillion. Housing debt totaled $12.354 trillion and non-housing debt was $4.709 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Texas, 15% have student loan debt. Of those holding student loan debt, 9% are in default. Auto/retail loan delinquency rate is 6%.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.