Schwab v. Reilly

(Slip Opinion) OCTOBER TERM, 2009 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader.

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

SCHWAB v. REILLY

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

No. 08–538. Argued November 3, 2009—Decided June 17, 2010

Respondent Reilly filed for Chapter 7 bankruptcy when her catering

business failed. She supported her petition with, inter alia, Schedule

B, on which debtors must list their assets, and Schedule C, on which

they must list the property they wish to reclaim as exempt. Her

Schedule B assets included cooking and other kitchen equipment, to

which she assigned an estimated market value of $10,718. On

Schedule C, she claimed two exempt interests in this “business

equipment”: a “tool[s] of the trade” exemption for the statutory

maximum “$1,850 in value,” 11 U. S. C. §522(d)(6); and $8,868 under

the statutory provisions allowing miscellaneous, or “wildcard,” ex

emptions up to $10,225 in value. The claimed exemptions’ total value

($10,718) equaled Reilly’s estimate of the equipment’s market value.

Property claimed as exempt will be excluded from the bankruptcy es

tate “[u]nless a party in interest” objects, §522(l), within a certain 30

day period, see Fed. Rule Bkrtcy. Proc. 4003(b). Absent an objection,

the property will be excluded from the estate even if the exemption’s

value exceeds what the Code permits. See, e.g., §522(l); Taylor v.

Freeland & Kronz, 503 U. S. 638, 642–643.

Although an appraisal revealed that the equipment’s total market

value could be as much as $17,200, petitioner Schwab, the bank

ruptcy estate’s trustee, did not object to the claimed exemptions be

cause the dollar value Reilly assigned to each fell within the limits of

§§522(d)(5) and (6). Schwab moved the Bankruptcy Court for per

mission to auction the equipment so Reilly could receive the $10,718

she claimed exempt and the estate could distribute the remaining

value to her creditors. Reilly countered that by equating on Schedule

C the total value of her claimed exemptions in the equipment with

the equipment’s estimated market value, she had put Schwab and

2 SCHWAB v. REILLY

Syllabus

her creditors on notice that she intended to exempt the equipment’s

full value, even if it turned out to be more than the amounts she de

clared and that the Code allowed. She asserted that the estate had

forfeited its claim to any portion of that value because Schwab had

not objected within the Rule 4003(b) period, and that she would dis

miss her petition rather than sell her equipment.

The Bankruptcy Court denied Schwab’s motion and Reilly’s condi

tional motion to dismiss. The District Court denied Schwab relief, re

jecting his argument that neither the Code nor Rule 4003(b) requires

a trustee to object to a claimed exemption where the amount the

debtor declares as the exemption’s value is within the limits the Code

prescribes. Affirming, the Third Circuit agreed that Reilly’s Schedule

C entries indicated her intent to exempt the equipment’s full value.

Relying on Taylor, it held that Schwab’s failure to object entitled

Reilly to exempt the full value of her equipment, even though that

value exceeded the amounts that Reilly declared and the Code per

mitted.

Held: Because Reilly gave “the value of [her] claimed exemption[s]” on

Schedule C dollar amounts within the range the Code allows for what

it defines as the “property claimed as exempt,” Schwab was not re

quired to object to the exemptions in order to preserve the estate’s

right to retain any value in the equipment beyond the value of the

exempt interest. Pp. 6–23.

(a) Reilly’s complicated view of the trustee’s statutory obligation,

and her reading of Schedule C, does not accord with the Code. Pp. 6–

15.

(1) The parties agree that this case is governed by §522(l), which

states that a Chapter 7 debtor must “file a list of property that the

debtor claims as exempt under subsection (b) of this section,” and

that “[u]nless a party in interest objects, the property claimed as ex

empt on such list is exempt.” Reilly asserts that the “property

claimed as exempt” refers to all of the information on Schedule C, in

cluding the estimated market value of each asset. Schwab and

amicus United States counter that because the Code defines such

property as an interest, not to exceed a certain dollar amount, in a

particular asset, not as the asset itself, the value of the property

claimed exempt should be judged on the dollar value the debtor as

signs the interest, not on the value the debtor assigns the asset.

Pp. 6–9.

(2) Schwab and the United States are correct. The portion of

§522(l) that resolves this case is not, as Reilly asserts, the provision

stating that the “property claimed as exempt on [Schedule C] is ex

empt” unless an interested party objects. Rather, it is the portion

that defines the objection’s target, namely, the “list of property that

Cite as: 560 U. S. ____ (2010) 3

Syllabus

the debtor claims as exempt under subsection (b).” Section 522(b)

does not define the “property claimed as exempt” by reference to the

estimated market value. It refers only to property defined in §522(d),

which in turn lists 12 categories of property that a debtor may claim

as exempt. Most of these categories and all the ones applicable here

define “property” as the debtor’s “interest”—up to a specified dollar

amount—in the assets described in the category, not as the assets

themselves. Schwab had no duty to object to the property Reilly

claimed as exempt because its stated value was within the limits the

Code allows. Reilly’s contrary view does not withstand scrutiny be

cause it defines the target of a trustee’s objection based on Schedule

C’s language and dictionary definitions of “property” at odds with the

Code’s definition. The Third Circuit failed to account for the Code’s

definition and for provisions that permit debtors to exempt certain

property in kind or in full regardless of value. See, e.g., §522(d)(9).

Schwab was entitled to evaluate the claimed exemptions’ propriety

based on three Schedule C entries: the description of the business

equipment in which Reilly claimed the exempt interests; the Code

provisions governing the claimed exemptions; and the amounts Reilly

listed in the column titled “value of claimed exemption.” This conclu

sion does not render Reilly’s market value estimate superfluous. It

simply confines that estimate to its proper role: aiding the trustee in

administering the estate by helping him identify assets that may

have value beyond the amount the debtor claims as exempt, or whose

full value may not be available for exemption. This interpretation is

consistent with the historical treatment of bankruptcy exemptions.

Pp. 9–15.

(b) Taylor does not dictate a contrary conclusion. While both Tay

lor and this case concern the consequences of a trustee’s failure to ob

ject to a claimed exemption within Rule 4003’s time period, Taylor es

tablishes and applies the straightforward proposition that an

interested party must object to a claimed exemption if the amount

the debtor lists as the “value claimed exempt” is not within statutory

limits. In Taylor, the value listed in Schedule C (“$ unknown”) was

not plainly within those limits, but here, the values ($8,868 and

$1,850) are within Code limits and thus do not raise the warning flag

present in Taylor. Departing from Taylor would not only ignore the

presumption that parties act lawfully and with knowledge of the law;

it would also require the Court to expand the statutory definition of

“property claimed as exempt” and the universe of information an in

terested party must consider in evaluating an exemption’s validity.

Even if the Code allowed such expansions, they would be ill advised.

Basing the definition of “property claimed exempt,” and thus an in

terested party’s obligation to object under §522(l), on inferences that

4 SCHWAB v. REILLY

Syllabus

party must draw from preprinted bankruptcy schedules that evolve

over time, rather than on the facial validity of the value the debtor

assigns the “property claimed as exempt” as defined by the Code,

would undermine the predictability the statute is designed to pro

vide. Pp. 16–18.

(c) Reilly’s argument threatens to convert the Code’s goal of giving

debtors a fresh start into a free pass. By permitting a debtor “to

withdraw from the estate certain interests in property, . . . up to cer

tain values,” Rousey v. Jacoway, 544 U. S. 320, 325, Congress bal

anced the difficult choices that exemption limits impose on debtors

with the economic harm that exemptions visit on creditors. This

Court should not alter that balance by requiring trustees to object to

claimed exemptions based on form entries beyond those governing an

exemption’s validity under the Code. In rejecting Reilly’s approach,

the Court does not create incentives for trustees and creditors to

sleep on their rights. The decision reached here encourages a debtor

wishing to exempt an asset’s full market value or the asset itself to

declare the value of the claimed exemption in a way that makes its

scope clear. Such declarations will encourage the trustee to object

promptly and preserve for the estate any value in the asset beyond

relevant statutory limits. If the trustee fails to object, or his objection

is overruled, the debtor will be entitled to exclude the asset’s full

value. If the objection is sustained, the debtor will be required either

to forfeit the portion of the exemption exceeding the statutory allow

ance or to revise other exemptions or arrangements with creditors to

permit the exemption. See Rule 1009(a). Either result will facilitate

the expeditious and final disposition of assets, and thus enable the

debtor and creditors to achieve a fresh start free of Reilly’s finality

and clouded-title concerns. Pp. 19–22.

534 F. 3d 173, reversed and remanded.

THOMAS, J., delivered the opinion of the Court, in which STEVENS,

SCALIA, KENNEDY, ALITO, and SOTOMAYOR, JJ., joined. GINSBURG, J.,

filed a dissenting opinion, in which ROBERTS, C. J., and BREYER, J.,

joined.

Cite as: 560 U. S. ____ (2010) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Wash­

ington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 08–538

_________________

WILLIAM G. SCHWAB, PETITIONER v. NADEJDA

REILLY

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

[June 17, 2010]

JUSTICE THOMAS delivered the opinion of the Court.

When a debtor files a Chapter 7 bankruptcy petition, all

of the debtor’s assets become property of the bankruptcy

estate, see 11 U. S. C. §541, subject to the debtor’s right to

reclaim certain property as “exempt,” §522(l). The Bank­

ruptcy Code specifies the types of property debtors may

exempt, §522(b), as well as the maximum value of the

exemptions a debtor may claim in certain assets, §522(d).

Property a debtor claims as exempt will be excluded from

the bankruptcy estate “[u]nless a party in interest” ob­

jects. §522(l).

This case presents an opportunity for us to resolve a

disagreement among the Courts of Appeals about what

constitutes a claim of exemption to which an interested

party must object under §522(l). The issue is whether an

interested party must object to a claimed exemption

where, as here, the Code defines the property the debtor is

authorized to exempt as an interest, the value of which

may not exceed a certain dollar amount, in a particular

type of asset, and the debtor’s schedule of exempt property

accurately describes the asset and declares the “value of

2 SCHWAB v. REILLY

Opinion of the Court

[the] claimed exemption” in that asset to be an amount

within the limits that the Code prescribes. Fed. Rule

Bkrtcy. Proc. Official Form 6, Schedule C (1991) (hereinaf­

ter Schedule C). We hold that, in cases such as this, an

interested party need not object to an exemption claimed

in this manner in order to preserve the estate’s ability to

recover value in the asset beyond the dollar value the

debtor expressly declared exempt.

I

Respondent Nadejda Reilly filed for Chapter 7 bank­

ruptcy when her catering business failed. She supported

her petition with various schedules and statements, two of

which are relevant here: Schedule B, on which the Bank­

ruptcy Rules require debtors to list their assets (most of

which become property of the estate), and Schedule C, on

which the Rules require debtors to list the property they

wish to reclaim as exempt. The assets Reilly listed on

Schedule B included an itemized list of cooking and other

kitchen equipment that she described as “business equip­

ment,” and to which she assigned an estimated market

value of $10,718. App. 40a, 49a–55a.

On Schedule C, Reilly claimed two exempt interests in

this equipment pursuant to different sections of the Code.

Reilly claimed a “tool[s] of the trade” exemption of $1,850

in the equipment under §522(d)(6), which permits a debtor

to exempt his “aggregate interest, not to exceed $1,850 in

value, in any implements, professional books, or tools, of

[his] trade.” See also 69 Fed. Reg. 8482 (2004) (Table).

And she claimed a miscellaneous exemption of $8,868 in

the equipment under §522(d)(5), which, at the time she

filed for bankruptcy, permitted a debtor to take a “wild­

card” exemption equal to the “debtor’s aggregate interest

in any property, not to exceed” $10,225 “in value.”1 See

——————

1 The 1994 version of 11 U. S. C. §522(d)(5) allowed debtors to exempt

Cite as: 560 U. S. ____ (2010) 3

Opinion of the Court

App. 58a. The total value of these claimed exemptions

($10,718) equaled the value Reilly separately listed on

Schedules B and C as the equipment’s estimated market

value, see id., at 49a, 58a.

Subject to exceptions not relevant here, the Federal

Rules of Bankruptcy Procedure require interested parties

to object to a debtor’s claimed exemptions within 30 days

after the conclusion of the creditors’ meeting held pursu­

ant to Rule 2003(a). See Fed. Rule Bkrtcy. Proc. 4003(b).

If an interested party fails to object within the time al­

lowed, a claimed exemption will exclude the subject prop­

erty from the estate even if the exemption’s value exceeds

what the Code permits. See, e.g., §522(l); Taylor v. Free

land & Kronz, 503 U. S. 638, 642–643 (1992).

Petitioner William G. Schwab, the trustee of Reilly’s

bankruptcy estate, did not object to Reilly’s claimed ex­

emptions in her business equipment because the dollar

value Reilly assigned each exemption fell within the limits

that §§522(d)(5) and (6) prescribe. App. 163a. But be­

cause an appraisal revealed that the total market value of

Reilly’s business equipment could be as much as $17,200,2

Schwab moved the Bankruptcy Court for permission to

auction the equipment so Reilly could receive the $10,718

she claimed as exempt, and the estate could distribute the

equipment’s remaining value (approximately $6,500) to

Reilly’s creditors. App. 141a–143a.

——————

an “aggregate interest in any property, not to exceed in value $800 plus

up to $7,500 of any unused amount of the [homestead or burial plot]

exemption provided under [§522(d)(1)].” In 2004, pursuant to

§104(b)(2), the Judicial Conference of the United States published

notice that §522(d)(5) would impose the $975 and $9,250 ($10,225 total)

limits that governed Reilly’s April 2005 petition. See 69 Fed. Reg. 8482

(Table). In 2007 and 2010 the limits were again increased. See 72 id.,

at 7082 (Table); 75 id., at 8748 (Table).

2 Schwab concedes that the appraisal occurred before Rule 4003(b)’s

30-day window for objecting to the claimed exemptions had passed. See

Brief for Petitioner 15.

4 SCHWAB v. REILLY

Opinion of the Court

Reilly opposed Schwab’s motion. She argued that by

equating on Schedule C the total value of the exemptions

she claimed in the equipment with the equipment’s esti­

mated market value, she had put Schwab and her credi­

tors on notice that she intended to exempt the equipment’s

full value, even if that amount turned out to be more than

the dollar amount she declared, and more than the Code

allowed. Id., at 165a. Citing §522(l), Reilly asserted that

because her Schedule C notified Schwab of her intent to

exempt the full value of her business equipment, he was

obliged to object if he wished to preserve the estate’s right

to retain any value in the equipment in excess of the

$10,718 she estimated. Because Schwab did not object

within the time prescribed by Rule 4003(b), Reilly asserted

that the estate forfeited its claim to such value. Id., at

165a. Reilly further informed the Bankruptcy Court that

exempting her business equipment from the estate was so

important to her that she would dismiss her bankruptcy

case if doing so was the only way to avoid the equipment’s

sale at auction.3

The Bankruptcy Court denied both Schwab’s motion to

auction the equipment and Reilly’s conditional motion to

dismiss her case. See In re Reilly, 403 B. R. 336 (Bkrtcy.

Ct. MD Pa. 2006). Schwab sought relief from the District

Court, arguing that neither the Code nor Rule 4003(b)

requires a trustee to object to a claimed exemption where

the amount the debtor declares as the “value of [the

——————

3 Reilly’s desire to avoid the equipment’s auction is understandable

because the equipment, which Reilly’s parents purchased for her

despite their own financial difficulties, has “ ‘extraordinary sentimental

value.’ ” Brief for Respondent 5 (quoting App. 152a–153a). But the

sentimental value of the property cannot drive our decision in this case,

because sentimental value is not a basis for construing the Bankruptcy

Code. Because the Code imposes limits on exemptions, many debtors

who seek to take advantage of the Code are, no doubt, put to the

similarly difficult choice of parting with property of “extraordinary

sentimental value.” Id., at 152a−153a; see infra, at 19–23.

Cite as: 560 U. S. ____ (2010) 5

Opinion of the Court

debtor’s] claimed exemption” in certain property is an

amount within the limits the Code prescribes. The Dis­

trict Court rejected Schwab’s argument, and the Court of

Appeals affirmed. See In re Reilly, 534 F. 3d 173 (CA3

2008).

The Court of Appeals agreed with the Bankruptcy Court

that by equating on Schedule C the total value of her

exemptions in her business equipment with the equip­

ment’s market value, Reilly “indicate[d] the intent” to

exempt the equipment’s full value. Id., at 174. In reach­

ing this conclusion, the Court of Appeals relied on our

decision in Taylor:

“[W]e believe this case to be controlled by Taylor.

Just as we perceive it was important to the Taylor

Court that the debtor meant to exempt the full

amount of the property by listing ‘unknown’ as both

the value of the property and the value of the exemp­

tion, it is important to us that Reilly valued the busi­

ness equipment at $10,718 and claimed an exemption

in the same amount. Such an identical listing put

Schwab on notice that Reilly intended to exempt the

property fully.

. . . . .

“ ‘[A]n unstated premise’ of Taylor was ‘that a debtor

who exempts the entire reported value of an asset is

claiming the “full amount,” whatever it turns out to

be.’ ” 534 F. 3d, at 178−179.

Relying on this “unstated premise,” the Court of Appeals

held that Schwab’s failure to object to Reilly’s claimed

exemptions entitled Reilly to the equivalent of an in-kind

interest in her business equipment, even though the value

of that exemption exceeded the amount that Reilly de­

clared on Schedule C and the amount that the Code al­

lowed her to withdraw from the bankruptcy estate. Ibid.

As noted, the Court of Appeals’ decision adds to dis­

6 SCHWAB v. REILLY

Opinion of the Court

agreement among the Circuits about what constitutes a

claim of exemption to which an interested party must

object under §522(l).4 We granted certiorari to resolve this

conflict. See 556 U. S. ___ (2009). We conclude that the

Court of Appeals’ approach fails to account for the text of

the relevant Code provisions and misinterprets our deci­

sion in Taylor. Accordingly, we reverse.

II

The starting point for our analysis is the proper inter­

pretation of Reilly’s Schedule C. If we read the Schedule

Reilly’s way, she claimed exemptions in her business

equipment that could exceed statutory limits, and thus

claimed exemptions to which Schwab should have objected

if he wished to enforce those limits for the benefit of the

estate. If we read Schedule C Schwab’s way, Reilly

claimed valid exemptions to which Schwab had no duty to

object. The Court of Appeals construed Schedule C Reil­

ly’s way and interpreted her claimed exemptions as im­

proper, and therefore objectionable, even though their

declared value was facially within the applicable Code

limits. In so doing, the Court of Appeals held that trustees

evaluating the validity of exemptions in cases like this

cannot take a debtor’s claim at face value, and specifically

——————

4 CompareIn re Williams, 104 F. 3d 688, 690 (CA4 1997) (holding

that interested parties have no duty to object to a claimed exemption

where the dollar amount the debtor assigns the exemption is facially

within the range the Code allows for the type of property in issue); In re

Wick, 276 F. 3d 412 (CA8 2002) (employing reasoning similar to Wil

liams, but stopping short of articulating a clear rule), with In re Green,

31 F. 3d 1098, 1100 (CA11 1994) (“A debtor who exempts the entire

reported value of an asset is claiming the [asset’s] ‘full amount,’ what­

ever it turns out to be”); In re Anderson, 377 B. R. 865 (Bkrtcy. App.

Panel CA6 2007) (similar); and In re Barroso-Herrans, 524 F. 3d 341,

344 (CA1 2008) (focusing on “how a reasonable trustee would have

understood the filings under the circumstances”); In re Hyman, 967

F. 2d 1316 (CA9 1992) (applying an analogous totality-of-the­

circumstances approach).

Cite as: 560 U. S. ____ (2010) 7

Opinion of the Court

cannot rely on the fact that the amount the debtor de­

clares as the “value of [the] claimed exemption” is within

statutory limits. Instead, the trustee’s duty to object turns

on whether the interplay of various schedule entries sup­

ports an inference that the debtor “intended” to exempt a

dollar value different than the one she wrote on the form.

534 F. 3d, at 178. This complicated view of the trustee’s

statutory obligation, and the strained reading of Schedule

C on which it rests, is inconsistent with the Code.5

The parties agree that this case is governed by §522(l),

which states that a Chapter 7 debtor must “file a list of

property that the debtor claims as exempt under subsec­

tion (b) of this section,” and further states that “[u]nless a

party in interest objects, the property claimed as exempt

on such list is exempt.” The parties further agree that the

“list” to which §522(l) refers is the “list of property . . .

claim[ed] as exempt” currently known as “Schedule C.”

See Schedule C.6 The parties, like the Courts of Appeals,

disagree about what information on Schedule C defines

the “property claimed as exempt” for purposes of evaluat­

ing an exemption’s propriety under §522(l). Reilly asserts

that the “property claimed as exempt” is defined by refer­

ence to all the information on Schedule C, including the

estimated market value of each asset in which the debtor

claims an exempt interest. Schwab and the United States

as amicus curiae argue that the Code specifically defines

the “property claimed as exempt” as an interest, the value

of which may not exceed a certain dollar amount, in a

particular asset, not as the asset itself. Accordingly, they

——————

5 The forms, rules, treatise excerpts, and policy considerations on

which the dissent relies, see post, at 4−16, must be read in light of the

Bankruptcy Code provisions that govern this case, and must yield to

those provisions in the event of conflict.

6 Bankruptcy Rule 4003 specifies the time within which the debtor

must file Schedule C, as well as the time within which interested

parties must object to the exemptions claimed thereon.

8 SCHWAB v. REILLY

Opinion of the Court

argue that the value of the property claimed exempt, i.e.,

the value of the debtor’s exempt interest in the asset,

should be judged on the value the debtor assigns the

interest, not on the value the debtor assigns the asset.

The point of disagreement is best illustrated by the rele­

vant portion of Reilly’s Schedule C:

Schedule C─Property Claimed as Exempt

Description of Specify Law Value of Current Market Value

Property Providing Each Claimed of Property Without

Exemption Exemption Deducting Exemptions

Schedule B

Personal

Property

.... .... .... ....

See attached 11 U. S. C. 1,850 10,718

list of business §522(d)(6)

equipment. 11 U. S. C. 8,868

§522(d)(5)

According to Reilly, Schwab was required to treat the

estimate of market value she entered in column four as

part of her claimed exemption in identifying the “property

claimed as exempt” under §522(l). See Brief for Respon­

dent 22–28. Relying on this premise, Reilly argues that

where, as here, a debtor equates the total value of her

claimed exemptions in a certain asset (column three) with

her estimate of the asset’s market value (column four), she

establishes the “property claimed as exempt” as the full

value of the asset, whatever that turns out to be. See ibid.

Accordingly, Reilly argues that her Schedule C clearly put

Schwab on notice that she “intended” to claim an exemp­

tion for the full value of her business equipment, and that

Schwab’s failure to oppose the exemption in a timely

manner placed the full value of the equipment outside the

estate’s reach.

Schwab does not dispute that columns three and four

apprised him that Reilly equated the total value of her

claimed exemptions in the equipment ($1,850 plus $8,868)

Cite as: 560 U. S. ____ (2010) 9

Opinion of the Court

with the equipment’s market value ($10,718). He simply

disagrees with Reilly that this “identical listing put [him]

on notice that Reilly intended to exempt the property

fully,” regardless whether its value exceeded the exemp­

tion limits the Code prescribes. 534 F. 3d, at 178. Schwab

and amicus United States instead contend that the Code

defines the “property” Reilly claimed as exempt under

§522(l) as an “interest” whose value cannot exceed a cer­

tain dollar amount. Brief for Petitioner 20–26; Reply Brief

for Petitioner 3–6; Brief for United States as Amicus

Curiae 12–18. Construing Reilly’s Schedule C in light of

this statutory definition, they contend that Reilly’s

claimed exemption was facially unobjectionable because

the “property claimed as exempt” (i.e., two interests in her

business equipment worth $8,868 and $1,850, respec­

tively) is property Reilly was clearly entitled to exclude

from her estate under the Code provisions she referenced

in column 2. See supra, at 8 (citing §§522(d)(5) and (6)).

Accordingly, Schwab and the United States conclude that

Schwab had no obligation to object to the exemption in

order to preserve for the estate any value in Reilly’s busi­

ness equipment beyond the total amount ($10,718) Reilly

properly claimed as exempt.

We agree. The portion of §522(l) that resolves this case

is not, as Reilly asserts, the provision stating that the

“property claimed as exempt on [Schedule C] is exempt”

unless an interested party objects. Rather, it is the por­

tion of §522(l) that defines the target of the objection,

namely, the portion that says Schwab has a duty to object

to the “list of property that the debtor claims as exempt

under subsection (b).” (Emphasis added.) That subsec­

tion, §522(b), does not define the “property claimed as

exempt” by reference to the estimated market value on

which Reilly and the Court of Appeals rely. Brief for

Respondent 22–23; 534 F. 3d, at 178. Section 522(b)

refers only to property defined in §522(d), which in turn

10 SCHWAB v. REILLY

Opinion of the Court

lists 12 categories of property that a debtor may claim as

exempt. As we have recognized, most of these categories

(and all of the categories applicable to Reilly’s exemptions)

define the “property” a debtor may “clai[m] as exempt” as

the debtor’s “interest”—up to a specified dollar amount—

in the assets described in the category, not as the assets

themselves. §§522(d)(5)–(6); see also §§522(d)(1)–(4), (8);

Rousey v. Jacoway, 544 U. S. 320, 325 (2005); Owen v.

Owen, 500 U. S. 305, 310 (1991). Viewing Reilly’s form

entries in light of this definition, we agree with Schwab

and the United States that Schwab had no duty to object

to the property Reilly claimed as exempt (two interests in

her business equipment worth $1,850 and $8,868) because

the stated value of each interest, and thus of the “prop­

erty claimed as exempt,” was within the limits the Code

allows.7

Reilly’s contrary view of Schwab’s obligations under

§522(l) does not withstand scrutiny because it defines the

target of a trustee’s objection—the “property claimed as

exempt”—based on language in Schedule C and dictionary

definitions of “property,” see Brief for Respondent 24–25,

40–41, that the definition in the Code itself overrides.8

——————

7 Schwab’s statutory duty to object to the exemptions in this case

turns solely on whether the value of the property claimed as exempt

exceeds statutory limits because the parties agree that Schwab had no

cause to object to Reilly’s attempt to claim exemptions in the equipment

at issue, or to the applicability of the Code provisions Reilly cited in

support of her exemptions.

8 The dissent’s approach suffers from a similar flaw, and misstates

our holding in critiquing it. See post, at 1−2 (asserting that by refusing

to subject “challenges to the debtor’s valuation of exemptible assets” to

the “30-day” objection period in Federal Rule of Bankruptcy Procedure

4003(b), we “drastically reduc[e] Rule 4003’s governance”). Challenges

to the valuation of what the dissent terms “exemptible assets” are not

covered by Rule 4003(b) in the first place. Post, at 1. Challenges to

“property claimed as exempt” as defined by the Code are covered by

Rule 4003(b), but in this case that property is not objectionable, so the

lack of an objection did not violate the Rule. Our holding is confined to

Cite as: 560 U. S. ____ (2010) 11

Opinion of the Court

Although we may look to dictionaries and the Bankruptcy

Rules to determine the meaning of words the Code does

not define, see, e.g., Rousey, supra, at 330, the Code’s

definition of the “property claimed as exempt” in this case

is clear. As noted above, §§522(d)(5) and (6) define the

“property claimed as exempt” as an “interest” in Reilly’s

business equipment, not as the equipment per se. Sections

522(d)(5) and (6) further and plainly state that claims to

exempt such interests are statutorily permissible, and

thus unobjectionable, if the value of the claimed interest is

below a particular dollar amount.9 That is the case here,

and Schwab was entitled to rely upon these provisions in

evaluating whether Reilly’s exemptions were objectionable

under the Code. See Lamie v. United States Trustee, 540

U. S. 526, 534 (2004); Hartford Underwriters Ins. Co. v.

Union Planters Bank, N. A., 530 U. S. 1, 6 (2000). The

Court of Appeals’ contrary holding not only fails to account

for the Code’s definition of the “property claimed as ex­

empt.” It also fails to account for the provisions in §522(d)

that permit debtors to exempt certain property in kind or

in full regardless of value. See, e.g., §§522(d)(9) (profes­

sionally prescribed health aids), (10)(C) (disability bene­

fits), (7) (unmatured life insurance contracts). We decline

to construe Reilly’s claimed exemptions in a manner that

——————

this point. Accordingly, our holding does not “reduc[e] Rule 4003’s

governance,” nor does it express any judgment on what constrains

objections to the type of “market value” estimates, post, at 1, the

dissent equates with the dollar value a debtor assigns the “property

claimed as exempt” as defined by the Code, see, e.g., post, at 2, 6.

9 Treating such claims as unobjectionable is consistent with our pre­

cedents. See, e.g., Rousey, 544 U. S., at 325. It also accords with

bankruptcy court decisions holding that where, as here, a debtor claims

an exemption pursuant to provisions that (like §522(d)(6)) permit the

debtor to exclude from the estate only an “interest” in certain property,

the “property” that becomes exempt absent objection, §522(l), is only

the “partial interest” claimed as exempt and not “the asset as a whole,”

e.g., In re Soost, 262 B. R. 68, 72 (Bkrtcy. App. Panel CA8 2001).

12 SCHWAB v. REILLY

Opinion of the Court

elides the distinction between these provisions and provi­

sions such as §§522(d)(5) and (6), see, e.g., Duncan v.

Walker, 533 U. S. 167, 174 (2001), particularly based upon

an entry on Schedule C—Reilly’s estimate of her equip­

ment’s market value—to which the Code does not refer in

defining the “property claimed as exempt.”10

For all of these reasons, we conclude that Schwab was

entitled to evaluate the propriety of the claimed exemp­

tions based on three, and only three, entries on Reilly’s

Schedule C: the description of the business equipment in

which Reilly claimed the exempt interests; the Code provi­

——————

10 The dissent’s approach does not avoid these concerns. The dissent

insists that “a debtor’s market valuation [of the equipment in which she

claims an exempt interest] is an essential factor in determining the

nature of the ‘interest’ [the] debtor lists as exempt” (and thus in deter­

mining whether the claimed exemption is objectionable), because

“without comparing [the debtor’s] market valuation of the equipment to

the value of her claimed exemption” the trustee “could not comprehend

whether [the debtor] claimed a monetary or an in-kind ‘interest’ in [the]

equipment.” Post, at 9, n. 9. This argument overlooks the fact that

there is another way the trustee could discern from the “face of the

debtor’s filings,” post, at 7, n. 6, whether the debtor claimed as exempt

a “monetary or an in-kind ‘interest’ in” her equipment, post, at 9, n. 9:

The trustee could simply consult the Code provisions the debtor listed

as governing the exemption in question. Here, those provisions,

§§522(d)(5) and (d)(6), expressly describe the exempt interest as an

“interest” “not to exceed” a specified dollar amount. Accordingly, it was

entirely appropriate for Schwab to view Reilly’s schedule entries as

exempting an interest in her business equipment in the (declared and

unobjectionable) amounts of $1,850 and $8,868. Viewing the entries

otherwise, i.e., as exempting the equipment in kind or in full no matter

what its dollar value, would unnecessarily treat the exemption as

violating the limits imposed by the Code provisions that govern it, as

well as ignore the distinction between those provisions and the provi­

sions that “authoriz[e] reclamation of the property in full without any

cap on value,” post, at 7, n. 5. And it would do all of this based on

information (identical dollar amounts in columns three and four of

Schedule C) that Schwab and one of his amici say often result from a

default setting in commercial bankruptcy software. See Reply Brief for

Petitioner 15; Brief for Nat. Assn. of Bankruptcy Trustees 13, n. 15.

Cite as: 560 U. S. ____ (2010) 13

Opinion of the Court

sions governing the claimed exemptions; and the amounts

Reilly listed in the column titled “value of claimed exemp­

tion.” In reaching this conclusion, we do not render the

market value estimate on Reilly’s Schedule C superfluous.

We simply confine the estimate to its proper role: aiding

the trustee in administering the estate by helping him

identify assets that may have value beyond the dollar

amount the debtor claims as exempt, or whose full value

may not be available for exemption because a portion of

the interest is, for example, encumbered by an unavoidable

lien. See, e.g., 3 W. Norton, Bankruptcy Law and Practice

§56:7 (3d ed. 2009); Brief for United States as Amicus Curiae

16; Dept. of Justice, Executive Office for U. S. Trustees,

Handbook for Chapter 7 Trustees, p. 8–1 (2005), http://

www.justice.gov /ust/eo/private_trustee/library/chapter07/

docs/7handbook1008/Ch7_Handbook.pdf (as visited June

14, 2010, and available in Clerk of Court’s case file). As

noted, most assets become property of the estate upon

commencement of a bankruptcy case, see 11 U. S. C. §541,

and exemptions represent the debtor’s attempt to reclaim

those assets or, more often, certain interests in those

assets, to the creditors’ detriment. Accordingly, it is at

least useful for a trustee to be able to compare the value of

the claimed exemption (which typically represents the

debtor’s interest in a particular asset) with the asset’s

estimated market value (which belongs to the estate sub­

ject to any valid exemption) without having to consult

separate schedules.11

——————

11 The dissent’s argument that the estimate plays a greater role, and

is “vital,” post, at 8, to determining whether the value a debtor assigns

the “property claimed as exempt” (here, an interest in certain business

equipment) is objectionable, see post, at 8−9, lacks statutory support

because the governing Code provisions phrase the exemption limit as a

simple dollar amount. The dissent’s view, see post, at 7−9, might be

plausible if the Code stated that the debtor could exempt an interest in

her equipment “not to exceed” a certain percentage of the equipment’s

14 SCHWAB v. REILLY

Opinion of the Court

Our interpretation of Schwab’s statutory obligations is

not only consistent with the governing Code provisions; it

is also consistent with the historical treatment of bank­

ruptcy exemptions. Congress has permitted debtors to

exempt certain property from their bankruptcy estates for

more than two centuries. See Act of Apr. 4, 1800, ch. 19,

§5, 2 Stat. 23.12 Throughout these periods, debtors have

validly exempted property based on forms that required

the debtor to list the value of a claimed exemption without

also estimating the market value of the asset in which the

——————

market value, because then it might be necessary to “compar[e] [the

debtor’s] market valuation of the equipment to the value of her claimed

exemption” to determine the exemption’s propriety. Post, at 9, n. 9.

But the Code does not phrase the exemption cap in such terms. More­

over, even accepting that the equivalent Schedule C entries the dissent

relies upon represent a claim to exempt an asset’s full value, the

dissent does not explain why this equivalence precludes a trustee from

relying on the dollar amount the debtor expressly assigns both entries.

According to the dissent, a trustee faced with such entries should

assume not only that the debtor reclaims from the estate what she

believes to be the full value of an asset in which the Code allows her to

exempt an interest “not to exceed” a certain dollar amount, e.g.,

§522(d)(6), but also that the debtor would continue to claim the asset’s

full value as exempt even if that value exceeds her estimate to a point

that would cause her claim to violate the Code. The schedule entries

themselves do not compel this assumption, and the Code provisions

they invoke undercut it. The evidence that the debtor in this case

would have chosen that course is external to her exemption schedule.

See, e.g., supra, at 4 (citing statements in Reilly’s motion to dismiss);

post, at 4, n. 3, 6 (same). And in the ordinary case, particularly if the

equivalent entries the dissent relies upon result from a software de­

fault, see n. 10, supra, there is no reason to assume that a debtor would

want to violate the Code or jeopardize other exemptions if her market

value estimate turns out to be wrong.

12 See also Act of Aug. 19, 1841, ch. 9, §3, 5 Stat. 442; Act of Mar. 2,

1867, ch. 176, §11, 14 Stat. 521, amended by Act of June 22, 1874, 18

Stat., Pt. 3, p. 182; Bankruptcy Act of July 1, 1898, ch. 541, §6, 30 Stat.

548, 11 U. S. C. §24 (1926 ed.); Chandler Act, ch. 575, §1, 52 Stat. 847,

11 U. S. C. §24 (1934 ed., Supp. IV); §522 (1976 ed., Supp. II); §522

(2000 ed. and Supp. V).

Cite as: 560 U. S. ____ (2010) 15

Opinion of the Court

debtor claimed the exempt interest. See Brief for Respon­

dent 46, n. 7 (citing Sup. Ct. Bkrtcy. Form 20 (1877)).13

Indeed, it was not until 1991 that Schedule B–4 was re­

designated as Schedule C and amended to require the

estimate of market value on which Reilly so heavily relies.

See Schedule C. This amendment was not occasioned by

legislative changes that altered the Code’s definition of

“the property claimed as exempt” in this case as an “inter­

est,” not to exceed a certain dollar amount, in Reilly’s

business equipment.14 Accordingly, we agree with Schwab

and the United States that this recent amendment to the

exemption form does not compel Reilly’s view of Schwab’s

statutory obligations, or render the claimed exemptions in

this case objectionable under the Code. See Reply Brief

for Petitioner 9–11; Brief for United States as Amicus

Curiae 16–17.15

——————

13 See also General Forms in Bankruptcy, Official Form 1, Schedule

B. (5) (1898); Fed. Rule Bkrtcy. Proc. Official Form 6, Schedule B–4

(1971).

14 The precise reason for the amendment is unclear. See Communica­

tion from THE CHIEF JUSTICE of the United States Transmitting

Amendments to the Federal Rules of Bankruptcy Procedure Prescribed

by the Court, Pursuant to 28 U. S. C. 2075, H. R. Doc. 102–80, p. 558,

reprinted in 11 Bankruptcy Rules Documentary History (1990–1991)

(referencing only the fact of the amendment). It may have been to

consolidate and reconcile the separate forms debtors were previously

required to file in Chapter 7 and Chapter 13 cases, see, e.g., In re

Beshirs, 236 B. R. 42, 46−47 (Bkrtcy. Ct. Kan. 1999), or simply to make

it easier for trustees to evaluate whether certain assets were viable

candidates for liquidation. Whatever the case, it did not result from

statutory changes to the Code provisions that govern this dispute.

15 Because the Code provisions we rely upon to resolve this case do

not obligate trustees to object under Rule 4003(b) to a debtor’s estimate

of the market value of an asset in which the debtor claims an exempt

interest, our analysis does not depend on whether the schedule of

“property claimed as exempt” (currently Schedule C) calls for such an

estimate or not. We engage the point only because Reilly suggests that

the 1991 schedule revisions requiring debtors to provide such an

estimate on the schedule of “property claimed as exempt” means that

16 SCHWAB v. REILLY

Opinion of the Court

III

The Court of Appeals erred in holding that our decision

in Taylor dictates a contrary conclusion. See 534 F. 3d, at

178. Taylor does not rest on what the debtor “meant” to

exempt. 534 F. 3d, at 178. Rather, Taylor applies to the

face of a debtor’s claimed exemption the Code provisions

that compel reversal here.

The debtor in Taylor, like the debtor here, filed a sched­

ule of exemptions with the Bankruptcy Court on which the

debtor described the property subject to the claimed ex­

emption, identified the Code provision supporting the

exemption, and listed the dollar value of the exemption.

Critically, however, the debtor in Taylor did not, like the

debtor here, state the value of the claimed exemption as a

specific dollar amount at or below the limits the Code

allows. Instead, the debtor in Taylor listed the value of

the exemption itself as “$ unknown”:

Schedule B-4. ─Property Claimed Exempt

Type of Location, Description, Specify the Value Claimed

Property and, So Far As Relevant Statute Exempt

to the Claim of Exemp­ Creating the

tion, Present Use of Exemption

Property

Proceeds from Winn v. TWA 11 U. S. C. $ unknown

lawsuit Claim for lost wages 522(b)(d)

The interested parties in Taylor agreed that this entry

——————

the estimate must be viewed as part of the exemption and is therefore

subject to the Rule. See Brief for Respondent 40−41. The dissent

ranges far beyond even this unavailing argument in suggesting that the

market value estimate served as “an essential factor in determining the

nature of the ‘interest’ a debtor lists as exempt,” post, at 9, n. 9, even

before 1991 when that estimate did not appear on the schedule of

“property claimed as exempt” (former Schedule B−4), but rather ap­

peared on former “Schedule B–2,” post, at 7, n. 6, which merely listed

the debtor’s “personal property” as of the date of the petition filing.

Interim Fed. Rule Bkrtcy. Proc. Official Form 6, Schedules B–2, B–4

(1979).

Cite as: 560 U. S. ____ (2010) 17

Opinion of the Court

rendered the debtor’s claimed exemption objectionable on

its face because the exemption concerned an asset (lawsuit

proceeds) that the Code did not permit the debtor to ex­

empt beyond a specific dollar amount. See 503 U. S., at

642. Accordingly, although this case and Taylor both

concern the consequences of a trustee’s failure to object to

a claimed exemption within the time specified by Rule

4003, the question arose in Taylor on starkly different

facts. In Taylor, the question concerned a trustee’s obliga­

tion to object to the debtor’s entry of a “value claimed

exempt” that was not plainly within the limits the Code

allows. In this case, the opposite is true. The amounts

Reilly listed in the Schedule C column titled “Value of

Claimed Exemption” are facially within the limits the

Code prescribes and raise no warning flags that warranted

an objection.16 See supra, at 8.

Taylor supports this conclusion. In holding otherwise,

the Court of Appeals focused on what it described as Tay

lor’s “ ‘unstated premise’ ” that “ ‘a debtor who exempts the

entire reported value of an asset is claiming the “full

amount,” whatever it turns out to be.’ ” 534 F. 3d, at 179.

But Taylor does not rest on this premise. It establishes

and applies the straightforward proposition that an inter­

ested party must object to a claimed exemption if the

——————

16 See, e.g., Barroso-Herrans, 524 F. 3d, at 345 (explaining that Sche­

dule C entries listing the value of a claimed exemption as “unknown,”

“to be determined,” or “100%” are “ ‘red flags to trustees and creditors,’

and therefore put them on notice that if they do not object, the whole

value of the asset—whatever it might later turn out to be—will be

exempt” (quoting 1 Collier on Bankruptcy ¶8.06[1][c][ii] (15th ed. rev.

2007); citation and some internal quotation marks omitted)). The

dissent concedes that a debtor’s exemption schedule “must give notice

sufficient to cue the trustee that an objection may be in order,” and

rightly observes that the sufficiency of a particular cue, or “ ‘ warning

flag,’ ” may lie “in the eye of the beholder.” Post, at 14. In this case,

however, the Code itself breaks the tie between what might otherwise

be two equally tenable views.

18 SCHWAB v. REILLY

Opinion of the Court

amount the debtor lists as the “value claimed exempt” is

not within statutory limits, a test the value ($ unknown)

in Taylor failed, and the values ($8,868 and $1,850) in this

case pass.

We adhere to this test. Doing otherwise would not only

depart from Taylor and ignore the presumption that par­

ties act lawfully and with knowledge of the law, cf. United

States v. Budd, 144 U. S. 154, 163 (1892); it would also

require us to expand the statutory definition of “property

claimed as exempt” and the universe of information an

interested party must consider in evaluating the validity

of a claimed exemption. Even if the Code allowed such

expansions, they would be ill advised. As evidenced by the

differences between Reilly’s Schedule C and the schedule

in Taylor, preprinted bankruptcy schedules change over

time. Basing the definition of the “property claimed as

exempt,” and thus an interested party’s obligation to

object under §522(l), on inferences that party must draw

from evolving forms, rather than on the facial validity of

the value the debtor assigns the “property claimed as

exempt” as defined by the Code, would undermine the

predictability the statute is designed to provide.17 For all

of these reasons, we take Reilly’s exemptions at face value

and find them unobjectionable under the Code, so the

——————

17 Reilly insists that our conclusion should nonetheless be avoided

because “procedures that burden the debtor’s exemption entitlements,

like those that impair a debtor’s discharge generally, are to be con­

strued narrowly.” Brief for Respondent 33 (citing Kawaauhau v.

Geiger, 523 U. S. 57, 62 (1998)). This argument misses the mark for

two reasons. First, the only burdens our conclusion imposes are bur­

dens the Code itself prescribes, specifically, the burdens the Code

places on debtors to state their claimed exemptions accurately and to

conform such claims to statutory limits. Second, and in any event,

Geiger and the other cases Reilly cites emphasize in the discharge

context the importance of limiting exceptions to discharge to “those

plainly expressed,” a principle that supports our approach here. Ibid.

(internal quotation marks omitted).

Cite as: 560 U. S. ____ (2010) 19

Opinion of the Court

objection deadline we enforced in Taylor is inapplicable

here.

IV

In a final effort to defend the Court of Appeals’ judg­

ment, Reilly asserts that her approach to §522(l) is neces­

sary to vindicate the Code’s goal of giving debtors a fresh

start, and to further its policy of discouraging trustees and

creditors from sleeping on their rights. See Brief for Re­

spondent 21, 55–68. Although none of Reilly’s policy

arguments can overcome the Code provisions or the as­

pects of Taylor that govern this case, our decision fully

accords with all of the policies she identifies. We agree

that “exemptions in bankruptcy cases are part and parcel

of the fundamental bankruptcy concept of a ‘fresh start.’ ”

Brief for Respondent 21 (quoting Rousey, 544 U. S., at

325); see Marrama v. Citizens Bank of Mass., 549 U. S.

365, 367 (2007). We disagree that this policy required

Schwab to object to a facially valid claim of exemption on

pain of forfeiting his ability to preserve for the estate any

value in Reilly’s business equipment beyond the value of

the interest she declared exempt. This approach threat­

ens to convert a fresh start into a free pass.

As we emphasized in Rousey, “[t]o help the debtor obtain

a fresh start, the Bankruptcy Code permits him to with

draw from the estate certain interests in property, such as

his car or home, up to certain values.” 544 U. S., at 325

(emphasis added). The Code limits exemptions in this

fashion because every asset the Code permits a debtor to

withdraw from the estate is an asset that is not available

to his creditors. See §522(b)(1). Congress balanced the

difficult choices that exemption limits impose on debtors

with the economic harm that exemptions visit on creditors,

and it is not for us to alter this balance by requiring trus­

tees to object to claimed exemptions based on form entries

beyond those that govern an exemption’s validity under

20 SCHWAB v. REILLY

Opinion of the Court

the Code. See Lamie, 540 U. S., at 534, 538; Hartford, 530

U. S., at 6; United States v. Locke, 471 U. S. 84, 95 (1985).

Reilly nonetheless contends that our approach creates

perverse incentives for trustees and creditors to sleep on

their rights. See Brief for Respondent 64, n. 10, 67–69.

Again, we disagree. Where a debtor intends to exempt

nothing more than an interest worth a specified dollar

amount in an asset that is not subject to an unlimited or

in-kind exemption under the Code, our approach will

ensure clear and efficient resolution of competing claims to

the asset’s value. If an interested party does not object to

the claimed interest by the time the Rule 4003 period

expires, title to the asset will remain with the estate pur­

suant to §541, and the debtor will be guaranteed a pay­

ment in the dollar amount of the exemption. If an inter­

ested party timely objects, the court will rule on the

objection and, if it is improper, allow the debtor to make

appropriate adjustments.18

Where, as here, it is important to the debtor to exempt

the full market value of the asset or the asset itself, our

decision will encourage the debtor to declare the value of

her claimed exemption in a manner that makes the scope

of the exemption clear, for example, by listing the exempt

value as “full fair market value (FMV)” or “100% of

——————

18 We disagree that Reilly’s approach to exemptions would more effi­

ciently dispose of competing claims to the asset. On Reilly’s view, a

trustee would be encouraged (if not obliged) to object to claims to

exempt a specific dollar amount of interest in an asset whenever the

value of the exempt interest equaled the debtor’s estimate of the asset’s

market value. Where the debtor genuinely intended to claim nothing

more than the face value of the exempt interest (which is rational if a

debtor wishes to ensure that his aggregate exemptions remain within

statutory limits), such an approach would engender needless objections

and litigation, particularly if the equation that would precipitate the

objection often results from a default software entry. See Reply Brief

for Petitioner 15; Brief for Nat. Assn. of Bankruptcy Trustees 13, n. 15.

Cite as: 560 U. S. ____ (2010) 21

Opinion of the Court

FMV.”19 Such a declaration will encourage the trustee to

object promptly to the exemption if he wishes to challenge

it and preserve for the estate any value in the asset be­

yond relevant statutory limits.20 If the trustee fails to

object, or if the trustee objects and the objection is over­

ruled, the debtor will be entitled to exclude the full value

of the asset. If the trustee objects and the objection is

sustained, the debtor will be required either to forfeit the

portion of the exemption that exceeds the statutory allow­

ance, or to revise other exemptions or arrangements with

her creditors to permit the exemption. See Fed. Rule

——————

19 The dissent’s observations about the poor fit between our admoni­

tion and a form entry calling for a dollar amount, see post, at 15, simply

reflect the tension between the Code’s definition of “property claimed

as exempt” (i.e., an interest, not to exceed a certain dollar amount, in

Reilly’s business equipment) and Reilly’s attempt to convert into a

dollar value an improper claim to exempt the equipment itself, “ ‘what­

ever [its value] turns out to be.’ ” In re Reilly, 534 F. 3d 173, 178−179

(CA3 2008). As the dissent concedes, “[s]ection 522(d) catalogs exemp­

tions of two types.” Post, at 7, n. 5. “Most exemptions—and all of those

Reilly invoked—place a monetary limit on the value of the property the

debtor may reclaim,” and such exemptions are distinct from those made

pursuant to Code provisions that “authoriz[e] reclamation of the prop­

erty in full without any cap on value.” Ibid. Nothing about Reilly’s

Schedule entries establishes that Schwab should have treated Reilly’s

claim for $10,718, an unobjectionable amount under the Code provi­

sions she expressly invoked, as an objectionable claim for thousands of

dollars more than those provisions allow, or as a claim for an uncapped

exemption under Code provisions she did not invoke and the dissent

admits are “not at issue here.” Ibid.

20 A trustee will not always file an objection. As the United States

observes, Schwab did not do so in this case with respect to certain

assets (perishable foodstuffs from Reilly’s commercial kitchen) that

could not be readily sold. See Brief for United States as Amicus Curiae

28, n. 7 (explaining that Schwab could have objected to Reilly’s claim of

a wildcard exemption for an interest in the food totaling $2,036 because

this claim, combined with her wildcard claims for an interest of $8,868

in her business equipment and interests totaling $26 in her bank

accounts, placed the total value of the interests she claimed exempt

under the wildcard provision $975 above then-applicable limits).

22 SCHWAB v. REILLY

Opinion of the Court

Bkrtcy. Proc. 1009(a). Either result will facilitate the

expeditious and final disposition of assets, and thus enable

the debtor (and the debtor’s creditors) to achieve a fresh

start free of the finality and clouded-title concerns Reilly

describes. See Brief for Respondent 57–59 (arguing that

“[u]nder [Schwab’s] interpretation of Rule 4003(b), a

debtor would never have the certainty of knowing whether

or not he or she may keep her exempted property until the

case had ended”); id., at 66.21

For all of these reasons, the policy considerations Reilly

cites support our approach. Where, as here, a debtor

accurately describes an asset subject to an exempt interest

and on Schedule C declares the “value of [the] claimed

exemption” as a dollar amount within the range the Code

allows, interested parties are entitled to rely upon that

value as evidence of the claim’s validity. Accordingly, we

hold that Schwab was not required to object to Reilly’s

claimed exemptions in her business equipment in order to

——————

21 Reilly’sclouded-title argument arises only if one accepts her flawed

conception of the exemptions in this case. According to Reilly, “once the

thirty-day deadline passed without objection” to her claim, she was

“entitled to know that she would emerge from bankruptcy with her

cooking equipment intact.” Brief for Respondent 57. There are two

problems with this argument. First, it assumes that the property she

claimed as exempt was the full value of the equipment. That assump­

tion is incorrect for the reasons we explain. Second, her argument

assumes that a claim to exempt the full value of the equipment would,

if unopposed, entitle her to the equipment itself as opposed to a pay­

ment equal to the equipment’s full value. That assumption is at least

questionable. Section 541 is clear that title to the equipment passed to

Reilly’s estate at the commencement of her case, and §§522(d)(5) and

(6) are equally clear that her reclamation right is limited to exempting

an interest in the equipment, not the equipment itself. Accordingly, it

is far from obvious that the Code would “entitle” Reilly to clear title in

the equipment even if she claimed as exempt a “full” or “100%” interest

in it (which she did not). Of course, it is likely that a trustee who fails

to object to such a claim would have little incentive to do anything but

pass title in the asset to the debtor. But that does not establish the

statutory entitlement Reilly claims.

Cite as: 560 U. S. ____ (2010) 23

Opinion of the Court

preserve the estate’s right to retain any value in the

equipment beyond the value of the exempt interest. In

reaching this conclusion, we express no judgment on the

merits of, and do not foreclose the courts from entertaining

on remand, procedural or other measures that may allow

Reilly to avoid auction of her business equipment.

* * *

We reverse the judgment of the Court of Appeals for the

Third Circuit and remand this case for further proceedings

consistent with this opinion.

It is so ordered.

Cite as: 560 U. S. ____ (2010) 1

GINSBURG, J., dissenting

SUPREME COURT OF THE UNITED STATES

_________________

No. 08–538

_________________

WILLIAM G. SCHWAB, PETITIONER v. NADEJDA

REILLY

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

[June 17, 2010]

JUSTICE GINSBURG, with whom THE CHIEF JUSTICE and

JUSTICE BREYER join, dissenting.

In Chapter 7 bankruptcies, debtors must surrender to

the trustee-in-bankruptcy all their assets, 11 U. S. C.

§541, but may reclaim for themselves exempt property,

§522. Within 30 days after the meeting of creditors, the

trustee or a creditor may file an objection to the debtor’s

designation of property as exempt. Fed. Rule Bkrtcy.

Proc. 4003(b). Absent timely objection, “property claimed

[by the debtor] as exempt . . . is exempt.” §522(l).

The trustee in this case, petitioner William G. Schwab,

maintains that the obligation promptly to object to exemp­

tion claims extends only to the qualification of an asset as

exemptible, not to the debtor’s valuation of the asset.

Respondent Nadejda Reilly, the debtor-in-bankruptcy,

urges that the timely objection requirement applies not

only to the debtor’s designation of an asset as exempt; the

requirement applies as well, she asserts, to her estimate of

the asset’s market value. That is so, she reasons, because

the asset’s current dollar value is critical to the determi­

nation whether she may keep the property intact and

outside bankruptcy, or whether the trustee, at any time

during the course of the proceedings, may sell it.

The Court holds that challenges to the debtor’s valua­

tion of exemptible assets need not be made within the 30­

2 SCHWAB v. REILLY

GINSBURG, J., dissenting

day period allowed for “objection[s] to the list of property

claimed as exempt.” Rule 4003(b). Instead, according to

the Court, no time limit constrains the trustee’s (or a

creditor’s) prerogative to place at issue the debtor’s

evaluation of the property as fully exempt.

The Court’s decision drastically reduces Rule 4003’s

governance, for challenges to valuation have been, until

today, the most common type of objection leveled against

exemption claims. See 9 Collier on Bankruptcy ¶4003.04,

p. 4003–15 (rev. 15th ed. 2009) (hereinafter Collier) (“Nor­

mally, objections to exemptions will focus primarily on

issues of valuation.”). In addition to departing from the

prevailing understanding and practice, the Court’s deci­

sion exposes debtors to protracted uncertainty concerning

their right to retain exempt property, thereby impeding

the “fresh start” exemptions are designed to foster. In

accord with the courts below, I would hold that a debtor’s

valuation of exempt property counts and becomes conclu­

sive absent a timely objection.

I

Nadejda Reilly is a cook who operated a one-person

catering business. Unable to cover her debts, she filed a

Chapter 7 bankruptcy petition appending all required

schedules and statements. Relevant here, her filings

included a form captioned “Schedule B - Personal Prop­

erty,” which called for enumeration of “all personal prop­

erty of the debtor of whatever kind.” App. 40a. On that

all-encompassing schedule, Reilly listed “business equip­

ment,” i.e., her kitchen equipment, with a current market

value of $10,718. Id., at 49a.

Reilly also filed the more particular form captioned

“Schedule C - Property Claimed as Exempt.” Id., at 56a.

Schedule C contained four columns, the first headed “De­

scription of Property”; the second, “Specify Law Providing

Each Exemption”; the third, “Value of Claimed Exemp­

Cite as: 560 U. S. ____ (2010) 3

GINSBURG, J., dissenting

tion”; and the fourth, “Current Market Value of Property

Without Deducting Exemptions.” Id., at 57a. In the first

column of Schedule C, Reilly wrote, as she did in Schedule

B’s description-of-property column: “See attached list of

business equipment.” Id., at 58a. On the list appended to

Schedules B and C, Reilly set out by hand a 31-item inven­

tory of her restaurant-plus-catering-venture equipment.

Next to each item, e.g., “Dough Mixer,” “Gas stove,”

“Hood,” she specified, first, the purchase price and, next,

“Today’s Market Value,” which added up to $10,718 for the

entire inventory. Id., at 51a–55a.1

As the laws securing exemption of her kitchen equip­

ment, Reilly specified in the second Schedule C column,

§552(d)(6), the exemption covering trade tools, and

§552(d)(5), the “wildcard” exemption. Id., at 58a.2 In the

value-of-claimed-exemption column, she listed $1,850,

then the maximum trade-tools exemption, and $8,868,

drawn from her wildcard exemption, amounts adding up

to $10,718. Ibid. And in the fourth, current-market­

value, column, she recorded $10,718, corresponding to the

total market value she had set out in her inventory and

reported in Schedule B. Ibid.

Before the 30-day clock on filing objections had begun to

run, an appraiser told Schwab that Reilly’s equipment was

worth at least $17,000. Brief for Petitioner 15; App. 164a.

Nevertheless, Schwab did not object to the $10,718 market

value Reilly attributed to her business equipment in

——————

1 Reilly’s Schedules B and C, and the inventory she attached to the

forms, are reproduced in an Appendix to this opinion.

2 Unlike exemptions that describe the specific property debtors may

preserve, e.g., 11 U. S. C. §522(d)(6) (debtor may exempt her “aggregate

interest, not to exceed [$1,850] in value, in any implements, profes­

sional books, or tool[s] of [her] trade”), the “wildcard” exemption per­

mits a debtor to shield her “aggregate interest in any property” she

chooses, up to a stated dollar limit, §522(d)(5); In re Smith, 640 F. 2d

888, 891 (CA7 1981).

4 SCHWAB v. REILLY

GINSBURG, J., dissenting

Schedule C and the attached inventory. Instead, he al­

lowed the limitations period to lapse and then moved,

unsuccessfully, for permission to sell the equipment at

auction. Id., at 141a–143a.3

From Reilly’s filings, the Bankruptcy Judge found it

evident that Reilly had claimed the property itself, not its

dollar value, as exempt. Id., at 168a–169a (“I know there’s

an argument . . . that . . . the property identified as exempt

is really the [valuation] column, [i.e., $10,718,] but that’s

not what the forms say. The forms say property declared

as exempt and to see attached list. So, they’re exempting

all the property. . . . If the Trustee believes that . . . all the

property cannot be exempt, [he] should object to it.”).

The District Court and Court of Appeals similarly con­

cluded that, by listing the identical amount, $10,718, as

the property’s market value and the value of the claimed

exemptions, Reilly had signaled her intention to safeguard

all of her kitchen equipment from inclusion in the bank­

ruptcy estate. In re Reilly, 403 B. R. 336, 338–339 (MD

Pa. 2006); In re Reilly, 534 F. 3d 173, 178 (CA3 2008).

Both courts looked to §522(l) and Federal Rule of Bank­

ruptcy Procedure 4003(b), which state, respectively:

“The debtor shall file a list of property that the

debtor claims as exempt . . . . Unless a party in inter­

est objects, the property claimed as exempt on such

list is exempt.” §522(l).

——————

3 Schwab informed Reilly at the meeting of creditors that he planned

to sell all of her business equipment. App. 137a. She promptly moved

to dismiss her bankruptcy petition, stating that her “business equip­

ment . . . is necessary to her livelihood and art, and was a gift to her

from her parents.” Id., at 138a. She “d[id] not desire to continue with

the bankruptcy,” she added, because “she wishe[d] to continue in

restaurant and catering as her occupation.” Ibid. The Bankruptcy

Court denied Reilly’s dismissal motion simultaneously with Schwab’s

motion to sell Reilly’s equipment. Id., at 149a–170a.

Cite as: 560 U. S. ____ (2010) 5

GINSBURG, J., dissenting

“A party in interest may file an objection to the list of

property claimed as exempt only within 30 days after

the meeting of creditors held under §341(a) is con­

cluded . . . . The court may, for cause, extend the time

for filing objections if, before the time to object ex­

pires, a party in interest files a request for an exten­

sion.” Rule 4003(b).4

Schwab having filed no objection within the allowable

30 days, each of the tribunals below ruled that the entire

inventory of Reilly’s business equipment qualified as

exempt in full. App. 168a; 403 B. R., at 339; 534 F. 3d, at

178. The leading treatise on bankruptcy, the Court of

Appeals noted, id., at 180, n. 4, is in accord:

“Normally, if the debtor lists property as exempt,

that listing is interpreted as a claim for exemption of

the debtor’s entire interest in the property, and the

debtor’s valuation of that interest is treated as the

amount of the exemption claimed. Were it other­

wise—that is, if the listing were construed to claim as

exempt only that portion of the property having the

value stated—the provisions finalizing exemptions if

no objections are filed would be rendered meaningless.

The trustee or creditors could [anytime] claim that the

debtor’s interest in the property was greater than the

value claimed as exempt and [then] object to the

debtor exempting his or her entire interest in the

property after the deadline for objections had passed.”

9 Collier ¶4003.02[1], pp. 4003–4 to 4003–5.

Agreeing with the courts below, I would hold that Reilly,

by her precise identification of the exempt property, and

her specification of $10,718 as both the current market

value of her kitchen equipment and the value of the

——————

4 In 2008, this prescription was recodified without material change

and designated Rule 4003(b)(1).

6 SCHWAB v. REILLY

GINSBURG, J., dissenting

claimed exemptions, had made her position plain: She

claimed as exempt the listed property itself—not the

dollar amount, up to $10,718, that sale of the property by

Schwab might yield. Because neither Schwab nor any

creditor lodged a timely objection, the listed property

became exempt, reclaimed as property of the debtor, and

therefore outside the bankruptcy estate the trustee is

charged to administer.

II

A

Pursuant to §522(l), Reilly filed a list of property she

claimed as exempt from the estate-in-bankruptcy. Her

filing left no doubt that her exemption claim encompassed

her entire inventory of kitchen equipment. Schwab, in

fact, was fully aware of the nature of the claim Reilly

asserted. At the meeting of creditors, Reilly reiterated

that she sought to keep the equipment in her possession;

she would rather discontinue the bankruptcy proceeding,

she made plain, than lose her equipment. See supra, at 4,

n. 3. Bankruptcy Rule 4003(b) requires the trustee, if he

contests the debtor’s exemption claim in whole or part, to

file an objection within 30 days after the meeting of credi­

tors. Absent a timely objection, “the property claimed as

exempt . . . is exempt.” §522(l); Rule 4003. That prescrip­

tion should be dispositive of this case.

The Court holds, however, that Schwab was not obliged

to file a timely objection to the exemption Reilly claimed,

and indeed could auction off her cooking equipment any­

time prior to her discharge. In so holding, the Court de­

crees that no objection need be made to a debtor’s valua­

tion of her property.

To support the conclusion that Rule 4003’s timely objec­

tion requirement does not encompass the debtor’s estima­

tion of her property’s market value, the Court homes in on

the language of exemption prescriptions that are subject to

Cite as: 560 U. S. ____ (2010) 7

GINSBURG, J., dissenting

a monetary cap.5 Those prescriptions, the Court points

out, “define the ‘property’ a debtor may ‘clai[m] as exempt’

as the debtor’s ‘interest’—up to a specified dollar

amount—in the assets described in the category, not as

the assets themselves.” Ante, at 10. So long as a debtor

values her claimed exemption at a dollar amount below

the statutory cap, the Court reasons, the claim is on-its­

face permissible no matter the market value she ascribes

to the asset. To evaluate the propriety of Reilly’s declared

“interest” in her kitchen equipment, the Court concludes,

Schwab was obliged promptly to inspect “three, and only

three, entries on Reilly’s Schedule C: the description of the

business equipment . . . ; the Code provisions governing

the claimed exemptions; and the amounts Reilly listed in

the column titled ‘value of claimed exemption.’ ” Ante, at

12–13.6

——————

5 Section 522(d) catalogs exemptions of two types. Most exemptions—

and all of those Reilly invoked—place a monetary limit on the value of

the property the debtor may reclaim. See, e.g., §522(d)(2) (“motor

vehicle”); §522(d)(3) (“household furnishings, household goods, wearing

apparel, appliances, books, animals, crops, or musical instruments”);

§522(d)(4) (“jewelry”). For certain exemptions not at issue here, the

Bankruptcy Code authorizes reclamation of the property in full without

any cap on value. See, e.g., §522(d)(7) (“unmatured life insurance

contract”); §522(d)(9) (“[p]rofessionally prescribed health aids”);

§522(d)(11)(A) (“award under a crime victim’s reparation law”).

6 In support of its view that market value is not relevant to determin­

ing the “property claimed as exempt” for purposes of Rule 4003(b)’s

timely objection mandate, the Court observes that Schedule C did not

require the debtor to list this information until 1991. Ante, at 14–15.

Prior to 1991, however, debtors recorded market value on a different

schedule. See Interim Fed. Rule Bkrtcy. Proc. Official Form 6, Sched­

ule B–2 (1979) (requiring debtor to list the “[m]arket value of [her]

interest [in personal property] without deduction for . . . exemptions

claimed”). Trustees assessing the “property claimed as exempt,”

therefore, have always been able, from the face of the debtor’s filings, to

compare the value of the claimed exemption to the property’s declared

market value. See Brief for National Association of Consumer Bank­

ruptcy Attorneys et al. as Amici Curiae 34.

8 SCHWAB v. REILLY

GINSBURG, J., dissenting

B

The Court’s account, however, shuts from sight the vital

part played by the fourth entry on Schedule C—current

market value—when a capped exemption is claimed. A

debtor who estimates a market value below the cap, and

lists an identical amount as the value of her claimed ex­

emption, thereby signals that her aim is to keep the listed

property in her possession, outside the estate-in­

bankruptcy. In contrast, a debtor who estimates a market

value above the cap, and above the value of her claimed

exemption, thereby recognizes that she cannot shelter the

property itself and that the trustee may seek to sell it for

whatever it is worth.7 Schedule C’s final column, in other

words, alerts the trustee whether the debtor is claiming a

right to retain the listed property itself as her own, a right

secured to her if the trustee files no timely objection.8

Because an asset’s market value is key to determining

——————

7 By authorizing exemption of assets that a debtor would want to

keep in kind, such as her jewelry and car, but limiting the exemptible

value of this property, Congress struck a balance between debtors’

and creditors’ interests: Debtors can reclaim items helpful to their

fresh start after bankruptcy, but only if those items are of modest

value. Assets of larger worth, however, are subject to liquidation so

that creditors may obtain a portion of the item’s value. Cf. In re Price,

370 F. 3d 362, 378 (CA3 2004) (“[B]ankruptcy law is bilateral, replete

with protections and policy considerations favoring both debtors and

creditors.”).

8 The significance of market value is what differentiates capped ex­

emptions from uncapped ones that permit debtors to exempt certain

property in kind regardless of its worth. See supra, at 7, n. 5. For

uncapped exemptions, the nature of the property the debtor has re­

claimed is clear: If the exemption is valid, the debtor gets the asset in

full every time. For capped exemptions, however, market value is a

crucial component in determining whether the debtor gets the item

itself or a sum of money representing a share of the item’s liquidation

value. Reading Bankruptcy Rule 4003(b) to require objections to

valuation thus does not, as the Court contends, “elid[e] the distinction”

between capped and uncapped exemptions, ante, at 12 (emphasis

added), but instead accounts for that distinction.

Cite as: 560 U. S. ____ (2010) 9

GINSBURG, J., dissenting

the character of the interest the debtor is asserting in that

asset, Rule 4003(b) is properly read to require objections to

valuation within 30 days, just as the Rule requires timely

objections to the debtor’s description of the property, the

asserted legal basis for the exemption, and the claimed

value of the exemption. See 4 Collier ¶522.05[1], p. 522–

28 (rev. 15th ed. 2005) (“[T]o evaluate the propriety of the

debtor’s claim of exemption,” trustees need the informa­

tion in all four columns of Schedule C; “[market] value” is

“essential” to judging whether the claim is proper because

“[e]xemption provisions often are limited according to . . .

[the property’s] value.”). 9

C

Requiring objections to market valuation notably facili­

tates the debtor’s fresh start, and thus best fulfills the

prime purpose of the exemption prescriptions. See, e.g.,

Burlingham v. Crouse, 228 U. S. 459, 473 (1913) (Bank­

ruptcy provisions “must be construed” in light of policy “to

give the bankrupt a fresh start.”). See also Rousey v.

——————

9 Suggesting that this interpretation of Rule 4003(b) “lacks statutory

support,” ante, at 13, n. 11, the Court repeatedly emphasizes that the

Bankruptcy Code defines the “property claimed as exempt,” to which a

trustee must object, as “the debtor’s ‘interest’—up to a specified dollar

amount—in the assets described in [capped exemption] categor[ies],”

ante, at 10; see, e.g., ante, at 11; ibid., n. 9; ante, at 21, n. 19. But the

commonly understood definition of a property “interest” is “[a] legal

share in something; all or part of a legal or equitable claim to or right

in property. . . . Collectively, the word includes any aggregation of

[such] rights.” Black’s Law Dictionary 828 (8th ed. 2004). Schwab,

therefore, could not comprehend whether Reilly claimed a monetary or

an in-kind “interest” in her kitchen equipment without comparing her

market valuation of the equipment to the value of her claimed exemp­

tion. See supra, at 8–9. In line with the statutory text, a debtor’s

market valuation is an essential factor in determining the nature of the

“interest” a debtor lists as exempt. Bankruptcy “forms, rules, treatise

excerpts, and policy considerations,” ante, at 7, n. 5, corroborate, rather

than conflict with, this reading of the Code.

10 SCHWAB v. REILLY

GINSBURG, J., dissenting

Jacoway, 544 U. S. 320, 325 (2005); United States v. Secu

rity Industrial Bank, 459 U. S. 70, 72, n. 1 (1982); ante, at

19. The 30-day deadline for objections, this Court has

recognized, “prompt[s] parties to act and . . . produce[s]

finality.” Taylor v. Freeland & Kronz, 503 U. S. 638, 644

(1992). As “there can be no possibility of further objection

to the exemptions” after this period elapses, the principal

bankruptcy treatise observes, “if the debtor is not yet in

possession of the property claimed as exempt, it should be

turned over to [her] at this time to effectuate fully the

fresh start purpose of the exemptions.” 9 Collier

¶4003.03[3], p. 4003–13.

With the benefit of closure, and the certainty it brings,

the debtor may, at the end of the 30 days, plan for her

future secure in the knowledge that the possessions she

has exempted in their entirety are hers to keep. See 534

F. 3d, at 180. If she has reclaimed her car from the estate,

for example, she may accept a job not within walking

distance. See Brief for National Association of Consumer

Bankruptcy Attorneys et al. as Amici Curiae 2–3 (herein­

after NACBA Brief). Or if she has exempted her kitchen

equipment, she may launch a new catering venture. See

App. 138a (Reilly “wishe[d] to continue in restaurant and

catering as her occupation” postbankruptcy.).

By permitting trustees to challenge a debtor’s valuation

of exempted property anytime before discharge, the Court

casts a cloud of uncertainty over the debtor’s use of assets

reclaimed in full. If the trustee gains a different opinion of

an item’s value months, even years, after the debtor has

filed her bankruptcy petition,10 he may seek to repossess

the asset, auction it off, and hand the debtor a check for

——————

10 Schwab states that “[c]ases in which there are assets to administer

. . . can take ‘one to four years’ to complete.” Brief for Petitioner 32

(quoting Dept. of Justice, U. S. Trustee Program, Preliminary Report on

Chapter 7 Asset Cases 1994 to 2000, p. 7 (June 2001)).

Cite as: 560 U. S. ____ (2010) 11

GINSBURG, J., dissenting

the dollar amount of her claimed exemption.11 With this

threat looming until discharge, “[h]ow can debtors rea­

sonably be expected to restructure their affairs”? NACBA

Brief 25. See In re Polis, 217 F. 3d 899, 903 (CA7 2000)

(Posner, J.) (“If the assets sought to be exempted by the

debtor were not valued at a date early in the bankruptcy

proceeding, neither the debtor nor the creditors would

know who had the right to them.”).

III

The Court and Schwab raise three concerns about read­

ing Rule 4003 to require timely objection to the debtor’s

estimate of an exempt asset’s market value: Would trus­

tees face an untoward administrative burden? Would

trustees lack fair notice of the need to object? And would

debtors be tempted to undervalue their property in an

effort to avoid the monetary cap on exemptions? In my

judgment, all three questions should be answered no.

A

The Court suggests that requiring timely objections to a

debtor’s valuation of exempt property would saddle trus­

tees with an unmanageable load. See ante, at 18 (declin­

ing to “expand . . . the universe of information an inter­

ested party must consider in evaluating the validity of a

claimed exemption”). See also Brief for Petitioner 32–33;

Brief for United States as Amicus Curiae 24.12 But trus­

——————

11 Money generated by liquidation of an asset will often be of less

utility to a debtor, who will have to pay more to replace the item. See

H. R. Rep. No. 95–595, p. 127 (1977) (noting that “household goods have

little resale value” but “replacement costs of the goods are generally

high”).

12 This concern is questionable in light of the prevailing practice, for,

as earlier noted, valuation objections are the most common Rule

4003(b) challenge. See supra, at 2. By lopping off valuation disagree­

ments from the timely objection requirement, see, e.g., ante, at 10–11,

n. 8, the Court so severely shrinks the Rule’s realm that this question

12 SCHWAB v. REILLY

GINSBURG, J., dissenting

tees, sooner or later, must attempt to ascertain the market

value of exempted assets. They must do so to determine

whether sale of the items would likely produce surplus

proceeds for the estate above the value of the claimed

exemption, see §704(a)(1); the only question, then, is when

this market valuation must occur—(1) within 30 days or

(2) at any time before discharge? Removing valuation

from Rule 4003’s governance thus does little to reduce the

labors trustees must undertake.

The 30-day objection period, I note, does not impose on

trustees any additional duty, but rather guides the exer­

cise of existing responsibilities; under Rule 4003(b), a

trustee must rank evaluation of the debtor’s exemptions as

a priority item in his superintendence of the estate.13 And

if the trustee entertains any doubt about the accuracy of a

debtor’s estimation of market value, the procedure for

interposing objections is hardly arduous. The trustee need

only file with the court a simple declaration stating that

an item’s value exceeds the amount listed by the debtor.14

——————

arises: Why are trustees granted a full 30 days to lodge objections?

Under the Court’s reading of the Rule, trustees need only compare a

debtor’s Schedule C to the text of the exemption prescriptions to assess

an exemption claim’s facial validity, with no further investigation

necessary. That comparison should take no more than minutes, surely

not a month.

13 Trustees, it bears noting, historically had valuation duties far more

onerous than they have today. Rule 4003’s predecessor required

trustees in the first instance, rather than debtors, to estimate the

market value of property claimed as exempt. See Rule 403(b) (1975).

Trustees had to provide this valuation to the court within 15 days of

their appointment. See ibid.

14 The leading bankruptcy treatise supplies an illustrative valuation

objection:

“[Name of Trustee], the duly qualified and acting trustee of the estate

of the debtor, would show the court the following:

“1. The debtor is not entitled under [the automobile exemption] to an

interest of more than $3,225 in an automobile. The automobile claimed

by debtor as exempt . . . has a value substantially greater than $3,225.

Cite as: 560 U. S. ____ (2010) 13

GINSBURG, J., dissenting

If the trustee needs more than 30 days to assess market

value, moreover, the time period is eminently extendable.

Rule 4003(b) prescribes that a trustee may, for cause, ask

the court for an extension of the objection period. Alterna­

tively, the trustee can postpone the conclusion of the

meeting of creditors, from which the 30-day clock runs,

simply by adjourning the meeting to a future date. Rule

2003(e). A trustee also may examine the debtor under

oath at the creditors’ meeting, Rule 2003(b)(1); if he gath­

ers information impugning her exemption claims, he may

ask the bankruptcy court to hold a hearing to determine

valuation issues, Rule 4003(c). See Taylor, 503 U. S., at

644 (“If [the trustee] did not know the value of [a claimed

exemption], he could have sought a hearing on the issue

. . . or . . . asked the Bankruptcy Court for an extension of

time to object.”). See also NACBA Brief 19, 21–23 (listing

ways trustees may enlarge the limitations period for

objections). Trustees, in sum, have ample mechanisms at

their disposal to gain the time and information they need

to lodge objections to valuation.

B

On affording trustees fair notice of the need to object,

the Court emphasizes that a debtor must list her claimed

exemptions “in a manner that makes the scope of the

exemption clear.” Ante, at 20. If a debtor wishes to ex­

empt property in its entirety, for example, the Court coun­

sels her to write “full fair market value (FMV)” or “100% of

FMV” in Schedule C’s value-of-claimed-exemption column.

——————

. . . . .

“WHEREFORE Trustee prays that the court determine that debtor is

not entitled to . . . the exemptio[n] claimed by him, that the [property

claimed as exempt] which [is] disallowed be turned over to the trustee

herein as property of the estate, and that he have such other and

further relief as is just.” 13A Collier §CS17.14, p. CS 17–22 (rev. 15th

ed. 2009). See also Rules 9013–9014.

14 SCHWAB v. REILLY

GINSBURG, J., dissenting

Ante, at 20–21 (internal quotation marks omitted). See

also Tr. of Oral Arg. 6–7, 26–29; In re Hyman, 967 F. 2d

1316, 1319–1320, n. 6 (CA9 1992) (Trustees must be able

to assess the validity of an exemption from the face of a

debtor’s schedules.). Our decision in Taylor v. Freeland &

Kronz, the Court notes, is instructive. In Taylor, the

debtor recorded the term “$ unknown” as the value of a

claimed exemption, which, the Court observes, raised a

“warning fla[g]” because the value “was not plainly within

the limits the Code allows.” Ante, at 17.

True, a debtor’s schedules must give notice sufficient to

cue the trustee that an objection may be in order. But a

“warning flag” is in the eye of the beholder: If a debtor

lists identical amounts as the market value of exempted

property and the value of her claimed exemption, she has,

on the face of her schedules, reclaimed the entire asset just

as surely as if she had recorded “100% of FMV” in Sched­

ule C’s value-of-claimed-exemption column. See Brief for

Respondent 36. See also 9 Collier ¶4003.03[3], p. 4003–14

(“Only when a debtor’s schedules specifically value the

debtor’s interest in the property at an amount higher than

the amount claimed as exempt can it be argued that a part

of the debtor’s interest in property has not been ex­

empted.” (emphasis added)).

In this case, by specifying $10,718 as both the current

market value of her kitchen equipment and the value of

her claimed exemptions, Reilly gave notice that she had

reclaimed the listed property in full. See supra, at 2–6.

To borrow the Court’s terminology, Reilly waved a “warn­

ing flag” that should have prompted Schwab to object if he

believed the equipment could not be reclaimed in its en­

tirety because its value exceeded the statutory cap. 534

F. 3d, at 179. See 4 Collier ¶522.05[2][b], p. 522–33 (“Nor­

mally, if a debtor lists an asset as having a particular

value in the schedules and then exempts that value, the

schedules should be read as a claim of exemption for the

Cite as: 560 U. S. ____ (2010) 15

GINSBURG, J., dissenting

entire asset, to which the trustee should object if the

trustee believes the asset has been undervalued.”).

Training its attention on trustees’ needs, moreover, the

Court overlooks the debtor’s plight. As just noted, the

Court counsels debtors wishing to exempt an asset in full

to write “100% of FMV” or “full FMV” in the value-of­

claimed-exemption column. But a debtor following the

instructions that accompany Schedule C would consider

such a response nonsensical, for those instructions direct

her to “state the dollar value of the claimed exemption in

the space provided.” Fed. Rule Bkrtcy. Proc. Official Form

6, Schedule C, Instruction 5 (1991) (emphasis added).

Chapter 7 debtors are often unrepresented. How are they

to know they must ignore Schedule C’s instructions and

employ the “warning flag” described today by the Court, if

they wish to trigger the trustee’s obligation to object to

their market valuation in a timely fashion? See In re

Anderson, 377 B. R. 865, 875 (Bkrtcy. App. Panel CA6

2007).15

C

Schwab finally urges that requiring timely objections to

a debtor’s market-value estimations “would give debtors a

perverse incentive to game the system by undervaluing

their assets.” Brief for Petitioner 35; see Brief for United

States as Amicus Curiae 27. The Court rejected an argu­

ment along these lines in Taylor, and should follow suit

here. Multiple measures, Taylor explained, discourage

undervaluation of property claimed as exempt. 503 U. S.,

——————

15 Trustees, in contrast, are repeat players in bankruptcy court; if this

Court required timely objections to market valuation, trustees would,

no doubt, modify their practices in response. See 1 Collier

¶8.06[1][c][ii], p. 8–75 (rev. 15th ed. 2009) (“Since Taylor [v. Freeland &

Kronz, 503 U. S. 638 (1992)], trustees rarely fail to closely scrutinize

vague exemption claims.”). Moreover, because valuation objections are

already the norm, see supra, at 2, and 11, n. 12, few trustees would

have to adjust their behavior.

16 SCHWAB v. REILLY

GINSBURG, J., dissenting

at 644. Among those measures: The debtor files her

exemption claim under penalty of perjury. See Rule

1008. She risks judicial sanction for signing documents

not well grounded in fact. Rule 9011. And proof of fraud

subjects her to criminal prosecution, 18 U. S. C. §152;

extends the limitations period for filing objections to

Schedule C, Rule 4003(b); and authorizes denial of dis­

charge, 11 U. S. C. §727(a)(4)(B). See also NACBA Brief

29–33 (detailing additional checks against inadequate or

inaccurate filings).

Furthermore, the objection procedure is itself a safe­

guard against debtor undervaluation. If a trustee sus­

pects that the market value of property claimed as exempt

may exceed a debtor’s estimate, he should do just what

Rule 4003(b) prescribes: “[F]ile an objection . . . within 30

days after the meeting of creditors.”

* * *

For the reasons stated, I would affirm the Third Cir­

cuit’s judgment.

Cite as: 560 U. S. ____ (2010)

17

Appendix to opiniondissenting , J.

GINSBURG, J., of GINSBURG

APPENDIX

18 SCHWAB v. REILLY

Appendix to opiniondissenting , J.

GINSBURG, J., of GINSBURG

Cite as: 560 U. S. ____ (2010) 19

Appendix to opiniondissenting , J.

GINSBURG, J., of GINSBURG

20 SCHWAB v. REILLY

Appendix to opiniondissenting , J.

GINSBURG, J., of GINSBURG

Cite as: 560 U. S. ____ (2010) 21

Appendix to opiniondissenting , J.

GINSBURG, J., of GINSBURG

22 SCHWAB v. REILLY

Appendix to opiniondissenting , J.

GINSBURG, J., of GINSBURG