Repose or Not? Informal Objections to Claims of Exemptions After Taylor v. Freeland
In Taylor v. Freeland & Kronz, over the trustee's untimely objection, the Supreme Court permitted the bankruptcy debtor to exempt $110,000 that was ineligible under substantive exemption law. The Court rejected the view that unless the debtor had a good faith claim to the exemption or a statutory basis for the exemption, even an untimely objection to the debtor's claim of exemption could terminate the debtor's right to the exemption. Disturbed by the prospects of debtors receiving unjustified windfalls, several courts have developed "informal objection" doctrines to circumvent the "strict constructionist" doctrine of Taylor. However, Taylor's potential for encouraging debtors to file fictitious exemption claims in the hope that no timely objection would be filed may be overstated. Both civil and criminal liability may deter debtors who file fictitious exemptions, even those who successfully obtain a Taylor exemption.
While Taylor established that a late objection is ineffective, it did not consider the nature of the objection the trustee must file to avoid debtors' "exemptions by declaration." The decision did not consider whether the trustee must present a formal objection to the bankruptcy court within Rule 4003(b)'s time period. Nor did the Court consider whether a formal objection, filed after expiration of Rule 4003(b)'s deadline, could be considered timely under the "relation back" doctrine or some other theory.
This article argues that 11 USC 522(l) is more of a statute of repose than a statute of limitation. One notable characteristic of a statute of repose is that upon expiration of the repose period, the cause of action terminates. Therefore, the trustee's right to object to the debtor's claim of section 522(l) exemption terminates upon expiration of the objection period of Rule 4003(b). The fact that section 522(l) is a functional statute of repose does not affect application of "informal objection" and "relation back" doctrines to cases where, before expiration of the Rule 4003(b) repose period, the trustee files an informal objection to the debtor's claim of exemption. If the informal objection is properly "filed," per Rule 5005, filing occurred before expiration of the thirty-day period for objecting, and the informal objection adequately apprised the debtor of the disputed claim of exemption, the trustee's objection rights vest. Once the trustee's objection rights vest, a formal objection after expiration of the repose period under Rule 4003(b) is effective whether you consider the formal objection an amendment to the original informal objection under the relation back doctrine or whether the foundations for vesting of the trustee's objection rights is based on the informal objection alone.
Oklahoma Law Review
Kenneth D. Ferguson,
Repose or Not? Informal Objections to Claims of Exemptions After Taylor v. Freeland,
Oklahoma Law Review
Available at: https://irlaw.umkc.edu/faculty_works/130