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Schwab v. Reilly

Media Items
Advocates
Craig Goldblatt (for the petitioner)
Jeffrey B. Wall (Assistant to the Solicitor General, Department of Justice, for the United States, as amicus curiae, supporting the petitioner)
G. Eric Brunstad, Jr. (for the respondent)
Case Basics
Docket No.: 
08-538
Petitioner: 
William G. Schwab
Respondent: 
Nadejda Reilly
Granted: 
Monday, April 27, 2009
Argued: 
Tuesday, November 3, 2009

Cite this page
The Oyez Project, Schwab v. Reilly U.S. ___
available at: (http://oyez.org/cases/2000-2009/2009/2009_08_538)
(last visited Thursday, November 26, 2009).
Facts of the Case: 

In April 2005, Nadejda Reilly filed Chapter 7 bankruptcy. Pursuant to standard practice, she listed equipment related to her catering business as "exempt" from the bankruptcy proceedings and valued the equipment at over $10,000. Creditor William Schwab independently had Ms. Reilly's business equipment appraised at over $17,000. He then sought a motion for the Bankruptcy Court to sell Ms. Reilly's equipment and turn over the proceeds, less the value of her exemption. Ms. Reilly countered that the business equipment had become fully exempt when Mr. Schwab failed to timely object when she listed the equipment as exempt. The Bankruptcy Court agreed and denied Mr. Schwab's motion to sell off Ms. Schwab's equipment. A federal district court in Pennsylvania affirmed the Bankruptcy Court. On appeal to the U.S. Court of Appeals for the Third Circuit, the court affirmed, holding that Mr. Schwab's failure to file a timely objection to Ms. Reilly's exemption barred him from moving to sell the property.

Question: 

1) When a debtor claims an item "exempt" from bankruptcy proceedings, is the exemption limited to the value claimed by the debtor, or regardless of the value claimed, does the exempted item become "fully exempt" after the creditor fails to make a timely objection to the exemption?

2) Does a creditor who wishes to sell a debtor's "exempted" item need to timely object to its exempt status in order to move for its sale, even if its real value exceeds the value claimed by the debtor?