Objections to Exemptions in Bankruptcy

Learn about Objections to Exemptions.

by:  , J.D.

The Bankruptcy Code allows a debtor to exclude certain property from the bankruptcy estate by claiming it as exempt.   What property a debtor may claim as exempt and the value of the corresponding exemption is usually determined by state law, although some states allow debtors to use a set of federal exemptions.  

In the bankruptcy petition, the debtor states which property is exempt. The bankruptcy trustee or any of the debtor's creditors may challenge the exemptions claimed by a debtor. To challenge a debtor’s claimed exemptions, a creditor or the trustee must file a document called an Objection to Exemptions.  

What Happens if a Creditor Files an Objection to Exemptions?

The objecting party has only a limited amount of time to file an Objection to Exemptions.   Under the Bankruptcy Code, the objection must be filed within thirty days from the conclusion of the Meeting of Creditors or the filing of any amendment to the debtor’s list of exemptions.   If a creditor or the trustee files an Objection to Exemptions after the deadline for doing so has passed, it will not be considered by the bankruptcy court.   However, a court may extend the time for filing objections to exemptions for cause. There are several exceptions to this 30-day deadline, but they don't apply to most debtors.

If an Objection to Exemptions is timely filed, it must be served on the debtor, the debtor’s attorney, and any other interested parties.   The debtor and any interested parties have a specified period of time to respond to the objections.   After all parties have been served, a hearing will be scheduled before the bankruptcy judge.  

Common Challenges to Exemptions

At the hearing, the creditor has the burden of proving that a particular exemption is improper.   The most common challenges to a debtor’s exemptions are:  

  • that the claimed exemptions is not authorized by law, or
  • that the listed value of the property claimed as exempt is incorrect.  

If the property value is challenged, keep in mind that the proper date of valuation is the date the petition is filed. Any increase in value since the petition date is not part of the estate.

Defending Against an Objection to Exemptions

At the hearing, the debtor must be prepared to show that the exemptions is legally allowed, and that the value of the property is accurate.  Often, debtors and creditors present appraisals or expert testimony to prove the value of property.  

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