The United States Supreme Court has granted certiorari in the bankruptcy case of Schwab v. Reilly.  In hearing Reilly, the Court will be called upon to reexamine precedent established in Taylor v. Freeland & Kronz, a bankruptcy law case decided 12 years ago that requires bankruptcy trustees to object to an exemption claimed by the chapter 7 debtor within 30 days after the meeting of creditors; if no challenge is made, the exemption will stand, regardless of whether it is founded in law or not.

Since Taylor, bankruptcy trustees have had difficulties ascertaining when it is appropriate to object to exemptions chosen by debtors when those exemptions are not obviously limited to the amount allowable in the statutory exemption.  The pertinent question that the trustees need to answer is whether the debtor is attempting to exempt the entire property listed, or is merely trying to exempt the property’s maximum cash value permissible under the statute.  The issue before the Court now, in Reilly, should help clarify matters for trustees, and will hopefully set clear guidelines to help them determine what kind of exemptions are being sought by debtors, and when it is necessary for them to object.

Tags: bankruptcy, Bankruptcy law, bankruptcy trustees, Chapter 7 bankruptcy, exemptions, Supreme Court