## Facts

- Emily Davis filed a Chapter 7 bankruptcy petition while an employment-discrimination lawsuit against Trans World Airlines (TWA) was pending.
- In her schedules, Davis claimed as exempt the expected lawsuit proceeds and a lost-wages claim, listing the value as “unknown.”
- The Chapter 7 trustee, Robert J. Taylor, learned at the creditors’ meeting that the lawsuit might yield about $90,000 and later that settlement discussions involved roughly $110,000.
- Taylor informed Davis’s attorneys (Freeland & Kronz) that he viewed the lawsuit proceeds as property of the estate and requested information, but he did not file an objection to the claimed exemption within the applicable objection period or seek an extension.
- After later state-court developments, the lawsuit settled for $110,000; a substantial payment was made to Davis and her attorneys, and Davis endorsed funds to the law firm for fees.
- Taylor then sued Davis’s attorneys in the bankruptcy court seeking turnover of the settlement proceeds for the estate.

## Issues

1. Whether a Chapter 7 trustee may contest the validity of a debtor’s claimed exemption after the Bankruptcy Rule 4003(b) 30-day objection period expires, even when the claimed exemption has no legal basis.

## Decision

- The Supreme Court affirmed the judgment for Freeland & Kronz.
- Because the trustee did not object within Rule 4003(b)’s deadline (and did not obtain a timely extension), the claimed exemption became effective under 11 U.S.C. § 522(l).
- The trustee was barred from later challenging the exemption’s validity, even if the debtor lacked any colorable statutory basis for exempting the full proceeds.

## Legal Principles

- Under 11 U.S.C. § 522(l), property claimed as exempt is exempt unless a party in interest objects.
- Bankruptcy Rule 4003(b) imposes a strict 30-day deadline (subject only to a timely granted extension) for objecting to claimed exemptions.
- Failure to object within the Rule 4003(b) period makes the exemption final and prevents later litigation over its legal merit.
- Courts may not create an extra-textual “good faith” or “colorable basis” exception to the statutory and rule-based deadline scheme.
- The bankruptcy system prioritizes early resolution and finality of exemption status; trustees must object or seek extensions promptly when investigation is needed.

## Conclusion

An exemption listed in a Chapter 7 debtor’s schedules becomes effective and unassailable once the Rule 4003(b) objection period expires without a timely objection or extension, even if the exemption claim had no valid statutory basis.


Taylor v. Freeland & Kronz, 503 U.S. 638 (1992)