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SCHWAB v. REILLY

Docket No.: 08-538
Certiorari Granted: 4/27/2009
Argued: November 3, 2009
Decided: June 17, 2010

Topics:

Fed. Rule Bkrtcy. Proc. 4003(b), Bankruptcy, Bankruptcy Code

PartyNames: William G. Schwab v. Nadejda Reilly
Petitioner: William G. Schwab
Respondent: Nadejda Reilly

Court Below: United States Court of Appeals for the Third Circuit
Citation: 534 F.3d 173

William G. Schwab
v.
Nadejda Reilly
Background:

The Third Circuit affirmed the United States District Court for the Middle District of Pennsylvania, which held that when the values on a debtor's list of assets and on her claim of exemptions are equal, a Chapter 7 Trustee must object to a debtor's claim of exempt property within 30 days in order to retain his statutory authority to later sell property for the benefit of creditors. Because of the wide and contradictory array of judicial decisions construing this Court's decision in Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 180 (1992), three questions are presented:

Consideration Limited:

LIMITED TO QUESTIONS 1 AND 2 PRESENTED BY THE PETITION

Question Presented:

1. When a debtor claims an exemption using a specific dollar amount that is equal to the value placed on the asset by the debtor, is the exemption limited to the specific amount claimed, or do the numbers being equal operate to "fully exempt" the asset, regardless of its true value? 2. When a debtor claims an exemption using a specific dollar amount that is equal to the value placed on the asset by the debtor, must a trustee who wishes to sell the asset object to the exemptions within the thirty day period of Rule 4003, even though the amount claimed as exempt and the type of property are within the exemption statute? 3. Did the Third Circuit unconstitutionally encroach on Congress' exclusive power to legislate in the field of bankruptcy when it created new trustee duties and when it created unlimited "in kind" exemptions where the statute contains specific dollar-value limitations?

Question:

1) When a debtor claims an item "exempt" from bankruptcy proceedings, is the exemption limited to the value claimed by the debtor, or regardless of the value claimed, does the exempted item become "fully exempt" after the creditor fails to make a timely objection to the exemption? 2) Does a creditor who wishes to sell a debtor's "exempted" item need to timely object to its exempt status in order to move for its sale, even if its real value exceeds the value claimed by the debtor?

SCHWAB v. REILLY
ORAL ARGUMENT

November 3, 2009

Holding: reversed and remanded
Decision: Decision: 6 votes for Schwab, 3 vote(s) against
Vote: 6-3
Opinion By: Justice Clarence Thomas
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