C

Requiring objections to market valuation notably facilitates 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) (Bankruptcy provisions “must be construed” in light of policy “to give the bankrupt a fresh start.”). See also Rousey v. Jacoway, 544 U. S. 320, 325 (2005); United States v. Security 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:chanrobles.com-red

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 (hereinafter 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.):chanrobles.com-red

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,[Footnote 10] he may seek to repossess the asset, auction it off, and hand the debtor a check for the dollar amount of her claimed exemption.[Footnote 11] With this threat looming until discharge, “[h]ow can debtors reasonably 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.”):chanrobles.com-red

III

The Court and Schwab raise three concerns about reading Rule 4003 to require timely objection to the debtor’s estimate of an exempt asset’s market value: Would trustees 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:chanrobles.com-red

A

The Court suggests that requiring timely objections to a debtor’s valuation of exempt property would saddle trustees with an unmanageable load. See ante, at 18 (declining to “expand … the universe of information an interested 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.[Footnote 12] But trustees, 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:chanrobles.com-red

The 30-day objection period, I note, does not impose on trustees any additional duty, but rather guides the exercise 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.[Footnote 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.[Footnote 14]

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. Alternatively, 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 gathers 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:chanrobles.com-red

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 exempt property in its entirety, for example, the Court counsels her to write “full fair market value (FMV)” or “100% of FMV” in Schedule C’s value-of-claimed-exemption column. 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:chanrobles.com-red

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 Schedule 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 exempted.” (emphasis added)):chanrobles.com-red

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 “warning flag” that should have prompted Schwab to object if he believed the equipment could not be reclaimed in its entirety because its value exceeded the statutory cap. 534 F. 3d, at 179. See 4 Collier ¶522.05[2][b], p. 522–33 (“Normally, 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 entire asset, to which the trustee should object if the trustee believes the asset has been undervalued.”):chanrobles.com-red

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).[Footnote 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 argument along these lines in Taylor, and should follow suit here. Multiple measures, Taylor explained, discourage undervaluation of property claimed as exempt. 503 U. S., 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 discharge, 11 U. S. C. §727(a)(4)(B). See also NACBA Brief 29–33 (detailing additional checks against inadequate or inaccurate filings):chanrobles.com-red

Furthermore, the objection procedure is itself a safeguard against debtor undervaluation. If a trustee suspects 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 Circuit’s judgment:chanrobles.com-red

APPENDIX

Footnote 1

Reilly’s Schedules B and C, and the inventory she attached to the forms, are reproduced in an Appendix to this opinion.

Footnote 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, professional books, or tool[s] of [her] trade”), the “wildcard” exemption permits 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).

Footnote 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 equipment … 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.

Footnote 4

In 2008, this prescription was recodified without material change and designated Rule 4003(b)(1).

Footnote 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”).

Footnote 6

In support of its view that market value is not relevant to determining 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, Schedule 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 Bankruptcy Attorneys et al. as Amici Curiae 34.

Footnote 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.”).

Footnote 8

The significance of market value is what differentiates capped exemptions 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 reclaimed 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.

Footnote 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 exemption. 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.

Footnote 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)).

Footnote 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”).

Footnote 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 disagreements 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 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.

Footnote 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.

Footnote 14

The leading bankruptcy treatise supplies an illustrative valuation objection:clubjurisvirtuallawlibrary

“[Name of Trustee], the duly qualified and acting trustee of the estate of the debtor, would show the court the following:clubjurisvirtuallawlibrary

“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:chanrobles.com-red

.      .      .      .      :chanrobles.com-red

“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.

Footnote 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.