Ohio Debt Relief: Your Guide to State Laws and Managing Debt

Every state in the U.S. has residents with debt of one kind or another and Ohio is no exception. Looking at the state’s per capita credit card, auto loan and mortgage debt, the state looks pretty healthy. Ohio ranks relatively low on the list of states with the highest per capita debt in those categories. But student loan debt is another story.

Ohio ranks fourth out of 50 states for student loan debt, which has led Ohio’s attorney general office (which is tasked with collecting outstanding state debts, including that of the state’s public colleges and universities) to create a student loan debt advisory group and recommend that all Ohio high school students receive a semester of financial literacy education.

For Ohio residents dealing with crushing student loans and other types of debt, LendingTree analyzed debt relief and debt collection laws in the state.

• Debt in Ohio: At a glance
• Debt collection in Ohio
• Ohio debt relief programs
• Payday lending laws in Ohio
• Tips to tackle debt in Ohio
• Filing for bankruptcy in Ohio
• The bottom line

Debt in Ohio: At a glance

Ohio debt collection laws

The Fair Debt Collection Practices Act (FDCPA) is a federal law that makes it illegal for third-party debt collectors to use abusive, unfair or deceptive practices when they collect debts.

Some states extend these laws to apply directly to creditors and lenders as well as collectors. However, Ohio has not extended the law to apply to the original creditors collecting their own debts.

Here is an overview of collection laws and exemptions in Ohio under the FDCPA.

• Collectors may not call you before 8 a.m. or after 9 p.m. unless you allow them to do so.
• Collectors may not call you at work, if you or your employer informs them that such calls are prohibited.
• You can send collectors a demand in writing to stop contacting you completely. After you send this letter, the collector can only call you to confirm it will not contact you again or to inform you that it intends to take legal action against you.
• Collectors may not discuss your debt with anyone other than you, your spouse or an attorney representing you. However, a collector can contact other people to get your address and phone number and to find out where you work.
• Collectors have to send you a written “validation notice” within five days of their first contact with you. This notice must include how much you owe, your creditor’s name and instructions for what to do if you believe you don’t owe the debt.
• Collectors cannot:
  • Harass you by threatening violence or harm, using obscene or profane language or using the phone to annoy you.
  • Lie by misrepresenting the amount you owe, claiming to be an attorney or government employee or falsely claiming you’ll be arrested.
  • Engage in unfair practices such as collecting interest and fees on top of the amount you owe (unless allowed by the contract or state law), depositing a post-dated check early or threatening to take your property unless it can be done legally.

Property exemptions

Exemptions protect a certain amount of your property from being threatened by a judgment. Some states exempt all of the equity in your home, no matter how valuable the home is, and set limits on other classes of property. Others offer little or no protection.

In Ohio, the following apply:

• Residence. The homestead exemption is $125,000.
• Vehicle. The vehicle exemption is $3,225 for one motor vehicle.
• Cash. The exemption for a person’s cash on hand or money in a bank account is limited to $400.
• Personal property. In Ohio, the exemption for a person’s household furnishings, clothing and other personal items is limited to $525 each, or $10,775 in total value.

Wage garnishment

Wage garnishment occurs when a percentage of your income is withheld by your employer’s payroll department by court order and sent to your creditor to pay a debt. Federal law limits the percentage of wages that can be garnished.

In any given workweek, an employer can withhold the lesser of:

• 25% of your disposable earnings, or
• The amount by which your weekly disposable earnings exceed 30 times the federal hourly minimum wage (currently $7.25 per hour).

Disposable earnings are the wages left after your employer withholds deductions required by law, such as federal, state and local income and payroll taxes and some retirement plans.

Some states impose stricter limits, but Ohio has not done so.

Responding to collection letters

If you receive a collection call or letter, your first step should be to ensure the communication is not a scam and the debt legitimately belongs to you. You can start by finding out this information through a debt verification letter:

• Who you are dealing with (the individual’s name and collection company’s name, address and phone number)
• The name of the original creditor
• The amount you’re said to owe
• How you can dispute the debt or verify it is yours

If you need to request more information from the debt collector, dispute the debt, request that the collector stop calling you or contact you only through your attorney, the Consumer Financial Protection Bureau (CFPB) has several sample letters to use.

If the debt is yours, you may want to negotiate with the collector, either on your own or with the help of an attorney, to settle the debt for less than the full amount owed and have the remaining balance forgiven. Doing this, however, will not change the fact that your credit score is likely to be negatively affected by the delinquent debt for a while.

If you have problems with the debt collector or want to report violations of the federal or state collection laws, you can file an online complaint with the Ohio attorney general’s office, or call 800-282-0515.

You may also want to file a complaint against a debt collector with the CFPB or the Federal Trade Commission (FTC).

Understanding the statute of limitations on debt in Ohio

Each state has its own statute of limitations on how long a creditor has to sue you to collect an unpaid debt. If your debt is past due by that many years or you haven’t made a payment in that many years, the creditor loses its right to sue you to collect the money. However, the creditor can still try to collect the debt by calling or sending letters.

That’s why it’s important to be careful before you agree to repay or make a payment on an older debt. If you make even a small payment, you could restart the clock on the statute of limitations, giving the lender a window in which they can sue you once again.

If you’re not sure if a debt is time-barred or not, consult with a consumer law attorney.

Ohio debt relief programs

If you’re having trouble managing debt on your own, you may benefit from working with a debt relief organization that can help you establish a budget, negotiate lower interest rates and monthly payments or refinance your debt.

However, scams are prevalent in the debt relief industry, even among companies that have a non-profit status. Here are some reputable sources in Ohio.

• The Ohio State University Extension Family and Consumer Sciences has financial professionals trained to help consumers assess their financial circumstances, improve their financial management skills and reduce debt.
• The National Foundation for Credit Counseling (NFCC) has a national network of certified credit counselors who can help consumers manage credit card debt, student loans and other financial matters.
• The U.S. Department of Justice maintains a directory of approved credit counseling agencies.

Before working with any credit counselor or debt management company, consider contacting the Ohio attorney general’s office to find out whether it has any consumer complaints about the company on file. Also, keep in mind that according to Ohio’s Debt Adjusters Act, organizations that offer debt relief, budget counseling and other such services are prohibited from:

• Accepting more than $75 for an initial consultation
• Accepting more than $100 annual for consultation fees or contributions
• Charging a periodic fee or contribution of more than 8.5% of the amount paid by the debtor each month or $30, whichever is greater

Payday lending laws in Ohio

Payday loans give consumers a small short-term, high-interest loan in exchange for immediate cash. People often turn to payday loans to see them through short-term financial difficulties, but these loans can lead to people spending months or even years paying back costly loans that drive them deeper into debt.

Ohio has specific statutes covering payday lending.

• Maximum loan amount: $1,000
• Maximum loan term: 12 months
• Finance charges: Caps the cost of the loan (fees and interest) at 60% of the loan’s original principal

Additionally, borrowers are not permitted to carry more than a $2,500 principal across several loans. Lenders are required to make an effort to check available data to determine whether the borrower has other outstanding loans. The law, passed in 2018, also authorized the state to create a database for lenders to consult.

Tips to tackle debt in Ohio

For many consumers, paying off debt involves making tough choices, such as scaling back on spending, sticking to a budget, or looking for ways to earn additional income.

Here are some other strategies you might consider:

Consolidate your debt

Debt consolidation involves combining all of your debts into a single monthly payment with a debt consolidation loan, also known as a personal loan.

Debt consolidation loans simplify your finances by eliminating the need to juggle multiple creditors, payments and due dates each month. However, if you have poor credit, you may have a tough time getting approved for a debt consolidation loan with an annual percentage rate (APR) lower than the interest rates being charged on your existing debt.

Be sure to shop around and compare offers from multiple lenders to be sure you’re getting the best deal. A good place to start is with your local credit union.

Refinance

Refinancing your auto or mortgage debt involves paying off your current loan by taking out a new one. If you can refinance into a lower interest rate, you may be able to save money and reduce your monthly payment, freeing up more room in your budget to pay off other high interest debts. However, refinancing often means extending your loan. For example, if you are 10 years into a 30-year mortgage and you refinance into a new 30-year mortgage, you’re adding an additional 10 years of mortgage payments. You might end up paying more in the long term, so run the numbers before using refinancing as a debt elimination strategy.

Use a balance transfer card

Debt consolidation with a balance transfer credit card shifts your debt from one or many high interest cards to one card with a low or zero interest rate. If you shift your debt to a 0% APR introductory rate and pay off the balance within the introductory period, you can save a significant amount of money and pay down debt faster, because more of your payment will go toward the principal. The promotional interest period typically lasts somewhere from 12 to 21 months.

However, there are some cons to consider. Some balance transfer cards charge a balance transfer fee, so be sure the fee is worth it before you sign up. Also, most of the best balance transfer offers require excellent credit for approval.

Lastly, if you don’t repay the entire balance by the time the promotional period ends, you might get hit with deferred interest charges. Be sure to read the fine print.

Filing for bankruptcy in Ohio

If you have debts you cannot repay and have exhausted your other options, you might need to consider filing for bankruptcy. Bankruptcy can give you a fresh start and stop the collection calls, but it will negatively affect your credit score for years.

Individuals have two options for declaring bankruptcy:

• Chapter 7 bankruptcy involves selling your assets to pay off creditors. To qualify for Chapter 7, you must pass a means test, which is done using an official form. Completing the test is complicated, so it’s best done with the help of an experienced bankruptcy attorney.
• Chapter 13 bankruptcy allows you to keep some of your assets and pay all or a part of your debts through a structured repayment plan. To qualify for Chapter 13, you must have a regular income and get help setting up a plan to pay off your creditors over a three- to five-year period.

It’s important to understand that bankruptcy remains on your credit report for seven to 10 years and may make it more challenging for you to buy a home, finance a car or get a personal loan.

The Ohio State University Extension Family and Consumer Sciences has a resource page for Ohio residents considering bankruptcy.

The Ohio State Bar Association also has a few articles about bankruptcy on its website and allows consumers to search for an attorney who specializes in bankruptcy and debt.

The bottom line

Ohio residents may face tough issues, from job loss to medical emergencies and even living beyond their means, that make their debt loads overwhelming. If you’re having trouble dealing with debt, it’s important to know what debt collectors can and can’t do and where you can find reputable help. The information above will help you protect yourself from debt relief scams and get you on the path to financial freedom.

The information in this article is accurate as of the date of publishing.