Bankruptcy: Schwab v. Reilly LITIGATION/CONTROVERSY

WilmerHale successfully represented William Schwab, a Chapter 7 bankruptcy trustee, before the Supreme Court. The case addressed (1) whether a debtor who correctly claims that an item of property is exempt from inclusion in the bankruptcy estate up to a certain dollar value, but incorrectly asserts that the value of the property was equal to the amount of the claimed exemption, is limited to exempting the specific amount claimed or whether he may fully exempt the asset, and (2) whether a trustee who wishes to sell the asset must object to the debtor’s value estimate within the 30-day period provided by the bankruptcy rules for objections to exemption claims. The Third Circuit held that an objection was required and that, because no objection was made in this case, the debtor’s property was exempt in full.

Before the Supreme Court we argued that no objection is necessary when the exemptions are valid for the amounts claimed. Additionally, we argued that the debtor is only entitled to an interest in the exempted property capped at the listed value and that Schwab was correct in moving to auction the exempted items in order to recoup anything over the exempted value. The Supreme Court largely agreed with these arguments.

Craig Goldblatt argued the case on November 3, 2009. With him on the brief from WilmerHale were Seth Waxman, Danielle Spinelli, Daniel Volchok, and former associates Leslie Garthwaite and Nathan Bruggeman.

Supreme Court Decision

Transcript of Oral Argument

Parties' Briefs

WilmerHale successfully represented William Schwab, a Chapter 7 bankruptcy trustee, before the Supreme Court. The case addressed (1) whether a debtor who correctly claims that an item of property is exempt from inclusion in the bankruptcy estate up to a certain dollar value, but incorrectly asserts that the value of the property was equal to the amount of the claimed exemption, is limited to exempting the specific amount claimed or whether he may fully exempt the asset, and (2) whether a trustee who wishes to sell the asset must object to the debtor’s value estimate within the 30-day period provided by the bankruptcy rules for objections to exemption claims. The Third Circuit held that an objection was required and that, because no objection was made in this case, the debtor’s property was exempt in full.

Before the Supreme Court we argued that no objection is necessary when the exemptions are valid for the amounts claimed. Additionally, we argued that the debtor is only entitled to an interest in the exempted property capped at the listed value and that Schwab was correct in moving to auction the exempted items in order to recoup anything over the exempted value. The Supreme Court largely agreed with these arguments.

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