The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.
Minnesota Bankruptcy Case:
Schwab v. Reilly, 130 S.Ct. 2652 (2010).
Exemption Claim is for Stated Amount, Not the Asset Itself
In a 6-3 decision reversing a ruling by the Third Circuit, the Court held that a trustee does not need to object to a debtor’s exemption claim, where the debtor values the asset at the exemption limit but the actual value exceeds the amount listed. The trustee still retains an interest in the asset beyond the listed value.
The debtor was in the catering business, and had filed a chapter 7 petition in Pennsylvania. She had scheduled her catering equipment at $10,718, and claimed an exemption of $10,718 under 11 U.S.C. § 522(d)(6) (the trade equipment exemption) and 11 U.S.C. § 522(d)(5) (applying the unused portion of her homestead exemption). Although the trustee did not object to the debtor’s exemptions within the 30-day period prescribed by FRBP 4003(b), after the trustee obtained a $17,000 appraisal of the equipment, he filed a motion to sell the equipment and, after allowing the debtor her exemption of $10,718, to distribute the surplus to her creditors. The majority found that when a debtor lists a value for an asset in which she claims an exemption, she exempts only the value and not the property itself.
The dissent, authored by Justice Ginsburg and joined by Chief Justice Roberts and Justice Breyer, took the position that when a debtor schedules an exemption, it signals the debtor’s intent to exempt the asset in its entirety. If the trustee suspects that the actual value of the asset exceeds the scheduled value, the trustee should file an objection within 30 days after the meeting of creditors, as prescribed by FRBP 4003(b).
Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.