Since I began teaching the bankruptcy survey course, I've added extra material apart from the textbook that I've named "trustee exemption planning." The core of this material is Schwab v. Reilly, 560 U.S. 770 (2010), which I've assigned more or less in its entirety. The case is a useful vehicle to discuss how to claim exemptions, what debtors (and their attorneys) may do if the value of property is unclear, what trustees likewise may do if the value of property is unclear, and how trustees may make money for creditors from an estate. The debtor, Reilly, also has a moving story about opening a restaurant and wanting to keep kitchen equipment that is sentimental to her. I give students her handwritten schedules outlining every piece of equipment she seeks to retain. The case also outlines how a trustee can preserve value for the estate beyond the relevant exemptions.
But the case is getting older. The forms modernization project updated Schedule C to align with its holding. Enter a new case, published about a month ago, In re Collins, Case No. 24-54928, Judge John E. Hoffman, Jr., Bankruptcy Court for the Southern District of Ohio. Bill Rochelle highlighted it for its clarification of what a trustee must do to object to an exemption claiming "100% of FMV." I am posting about the opinion to further highlight it for its usefulness in teaching about exemptions in consumer bankruptcy.
The debtor filed a chapter 13 petition. The opinion includes a section detailing the function of exemptions in chapter 13 versus chapter 7, a distinction that is worth emphasizing more than once in a bankruptcy course. The opinion also includes a section discussing the history of Schwab and the circuit split it resolved. It is complete and succinct. The opinion further includes a section about post-Schwab amendments to Schedule C, with pictures. I spend time in class asking students whether the amendments to Schedule C can resolve some lingering questions about claiming "100% of FMV" or similar. In re Collins provides an answer. I'm thinking of rotating it into my extra materials for the bankruptcy course this fall, and retiring using Schwab v. Reilly in its entirety.
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One response to “Teaching Trustee Exemption Planning in Bankruptcy”
The largest preparation software for debtors, BestCase, allows one to put “100%” on the top line of Schedule C’s 3rd column “Amount of the exemption you claim” instead of checking the 2nd line “100% of fair market value . . . ” Always thought that was an interesting choice to assert, especially on things such as Social Security, but can be used on anything subject to a trustee objecting to a 100% claim of exemption.