## Facts

- Nadejda Reilly filed for Chapter 7 bankruptcy after her catering business failed.
- On Schedule B, she listed cooking and other kitchen equipment as business equipment with an estimated market value of $10,718.
- On Schedule C, she claimed exemptions in that equipment totaling $10,718: a tools-of-the-trade exemption up to $1,850 under 11 U.S.C. § 522(d)(6) and a wildcard exemption of $8,868 under § 522(d)(5).
- The Bankruptcy Code provides that property claimed as exempt is excluded from the estate unless a party in interest objects within the time set by Federal Rule of Bankruptcy Procedure 4003(b).
- An appraisal later valued the equipment as high as $17,200.
- The Chapter 7 trustee, William G. Schwab, did not object within the 30-day period because each claimed exemption amount was within the statutory caps.
- Schwab later sought to sell the equipment, proposing to pay Reilly $10,718 (the claimed exempt amount) and distribute any surplus to creditors.
- Reilly argued that listing an exemption value equal to the scheduled market value communicated an intent to exempt the equipment itself in full, so the trustee’s failure to object barred any sale for the estate’s benefit.
- The lower courts ruled for Reilly; the Supreme Court granted review to resolve a circuit conflict on what constitutes a claim of exemption requiring objection under § 522(l).

## Issues

1. When the Code authorizes exemption only of an “interest” up to a specified dollar amount, does a debtor’s Schedule C entry claiming a dollar amount within the cap (even if equal to the debtor’s stated market value) require a timely objection to preserve the estate’s right to value above that amount?
2. Does failure to object under Rule 4003(b) convert a dollar-capped exemption claim into an exemption of the underlying asset itself, including any excess or later-discovered value?

## Decision

- The Supreme Court reversed and remanded in an opinion by Justice Thomas.
- When an exemption is defined as a dollar-limited “interest” in an asset, a trustee need not object if the debtor’s Schedule C:
  - accurately describes the asset, and
  - states a “value of the claimed exemption” that is within statutory limits.
- Schwab’s failure to object did not forfeit the estate’s right to realize value in the equipment above the $10,718 claimed as exempt.
- The Court distinguished Taylor v. Freeland & Kronz as addressing untimely objections to facially unauthorized or effectively uncapped exemption claims, not to facially valid dollar-limited claims.

## Legal Principles

- Many Bankruptcy Code exemptions define exempt property as an “interest” in a specified type of asset “not to exceed” a stated dollar amount; the exemption is the debtor’s interest up to that amount, not the asset itself.
- Under Rule 4003(b), a trustee must object within the deadline when an exemption claim is facially improper (e.g., exceeds statutory limits or otherwise seeks more than the Code allows), but a trustee is not required to object merely because an asset might be undervalued.
- Listing an exemption amount equal to the debtor’s estimated market value does not, without more, communicate a claim to exempt the asset in kind when the relevant exemption provisions are dollar-capped.
- Taylor’s objection-deadline rule does not require trustees to file protective objections to preserve the estate’s right to later-discovered value where the debtor’s claimed exemption amount is within the statutory cap.

## Conclusion

The Court held that a facially valid, dollar-capped exemption claim does not require a trustee’s timely objection to preserve the estate’s entitlement to any value in the asset above the claimed exemption amount; the debtor’s entry of a within-limit dollar figure is treated as claiming only that value, not the entire asset.


Schwab v. Reilly, 560 U.S. 770 (2010)