Filed: Mar. 04, 2014
Latest Update: Mar. 02, 2020
Summary: (Slip Opinion) OCTOBER TERM, 2013 1 Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321 , 337. SUPREME COURT OF THE UNITED STATES Syllabus LAW v. SIEGEL, CHAPTER 7 TRUSTEE CERTIORARI
Summary: (Slip Opinion) OCTOBER TERM, 2013 1 Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321 , 337. SUPREME COURT OF THE UNITED STATES Syllabus LAW v. SIEGEL, CHAPTER 7 TRUSTEE CERTIORARI T..
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(Slip Opinion) OCTOBER TERM, 2013 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co.,
200 U.S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
LAW v. SIEGEL, CHAPTER 7 TRUSTEE
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT
No. 12–5196. Argued January 13, 2014—Decided March 4, 2014
Petitioner Law filed for Chapter 7 bankruptcy. He valued his Califor-
nia home at $363,348, claiming that $75,000 of that value was cov-
ered by California’s homestead exemption and thus was exempt from
the bankruptcy estate. See
11 U.S. C. §522(b)(3)(A). He also
claimed that the sum of two voluntary liens—one of which was in fa-
vor of “Lin’s Mortgage & Associates”—exceeded the home’s nonex-
empt value, leaving no equity recoverable for his other creditors. Re-
spondent Siegel, the bankruptcy estate trustee, challenged the “Lin”
lien in an adversary proceeding, but protracted and expensive litiga-
tion ensued when a supposed “Lili Lin” in China claimed to be the
beneficiary of Law’s deed of trust. Ultimately, the Bankruptcy Court
concluded that the loan was a fiction created by Law to preserve his
equity in the house. It thus granted Siegel’s motion to “surcharge”
Law’s $75,000 homestead exemption, making those funds available to
defray attorney’s fees incurred by Siegel in overcoming Law’s fraudu-
lent misrepresentations. The Ninth Circuit Bankruptcy Appellate
Panel and the Ninth Circuit affirmed.
Held: The Bankruptcy Court exceeded the limits of its authority when
it ordered that the $75,000 protected by Law’s homestead exemption
be made available to pay Siegel’s attorney’s fees. Pp. 5–12.
(a) A bankruptcy court may not exercise its authority to “carry out”
the provisions of the Code,
11 U.S. C. §105(a), or its “inherent power
. . . to sanction ‘abusive litigation practices,’ ” Marrama v. Citizens
Bank of Mass.,
549 U.S. 365, 375–376, by taking action prohibited
elsewhere in the Code. Here, the Bankruptcy Court’s “surcharge”
contravened §522, which (by reference to California law) entitled Law
to exempt $75,000 of equity in his home from the bankruptcy estate,
§522(b)(3)(A), and which made that $75,000 “not liable for payment of
2 LAW v. SIEGEL
Syllabus
any administrative expense,” §522(k), including attorney’s fees, see
§503(b)(2). The surcharge thus exceeded the limits of both the court’s
authority under §105(a) and its inherent powers. Pp. 5–7.
(b) Siegel argues that an equitable power to deny an exemption by
“surcharging” exempt property in response to a debtor’s misconduct
can coexist with §522. But insofar as that argument equates the sur-
charge with an outright denial of Law’s homestead exemption, it
founders on this case’s procedural history. The Bankruptcy Appellate
Panel recognized that because no one timely objected to the home-
stead exemption, it became final before the surcharge was imposed.
And a trustee who fails to make a timely objection cannot challenge
an exemption. Taylor v. Freeland & Kronz,
503 U.S. 638, 643–644.
Assuming the Bankruptcy Court could have revisited Law’s entitle-
ment to the exemption, §522 specifies the criteria that render proper-
ty exempt, and a court may not refuse to honor a debtor’s invocation
of an exemption without a valid statutory basis. Federal courts may
apply state law to disallow state-created exemptions, but federal law
itself provides no authority for bankruptcy courts to deny an exemp-
tion on a ground not specified in the Code. Pp. 7–10.
(c) Neither the holding of Marrama v. Citizens Bank nor its dictum
points toward a different result. There, the debtor’s bad faith kept
him from converting his bankruptcy from a Chapter 7 liquidation to a
Chapter 13 reorganization as permitted by §706(a). But that was be-
cause his conduct prevented him from qualifying under Chapter 13,
and thus he could not satisfy §706(d), which expressly conditions
conversion on the debtor’s ability to qualify under Chapter 13.
Pp. 10–11.
(d) This ruling forces Siegel to shoulder a heavy financial burden
due to Law’s egregious misconduct and may produce inequitable re-
sults for other trustees and creditors, but it is not for courts to alter
the balance that Congress struck in crafting §522. Cf. Guidry v.
Sheet Metal Workers National Pension Fund,
493 U.S. 365, 376–377.
P. 11.
(e) Ample authority remains to address debtor misconduct, includ-
ing denial of discharge, see §727(a)(2)–(6); sanctions for bad-faith liti-
gation conduct under the Bankruptcy Rules, §105(a), or a bankruptcy
court’s inherent powers; enforcement of monetary sanctions through
the normal procedures for collecting money judgments, see §727(b); or
possible prosecution under
18 U.S. C. §152. Pp. 11–12.
435 Fed. Appx. 697, reversed and remanded.
SCALIA, J., delivered the opinion for a unanimous Court.
Cite as: 571 U. S. ____ (2014) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 12–5196
_________________
STEPHEN LAW, PETITIONER v. ALFRED H. SIEGEL,
CHAPTER 7 TRUSTEE
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[March 4, 2014]
JUSTICE SCALIA delivered the opinion of the Court.
The Bankruptcy Code provides that a debtor may ex
empt certain assets from the bankruptcy estate. It further
provides that exempt assets generally are not liable for
any expenses associated with administering the estate. In
this case, we consider whether a bankruptcy court none
theless may order that a debtor’s exempt assets be used to
pay administrative expenses incurred as a result of the
debtor’s misconduct.
I. Background
A
Chapter 7 of the Bankruptcy Code gives an insolvent
debtor the opportunity to discharge his debts by liquidat
ing his assets to pay his creditors.
11 U.S. C. §§704(a)(1),
726, 727. The filing of a bankruptcy petition under Chap
ter 7 creates a bankruptcy “estate” generally comprising
all of the debtor’s property. §541(a)(1). The estate is
placed under the control of a trustee, who is responsible
for managing liquidation of the estate’s assets and distri
bution of the proceeds. §704(a)(1). The Code authorizes
2 LAW v. SIEGEL
Opinion of the Court
the debtor to “exempt,” however, certain kinds of property
from the estate, enabling him to retain those assets post
bankruptcy. §522(b)(1). Except in particular situations
specified in the Code, exempt property “is not liable” for
the payment of “any [prepetition] debt” or “any adminis
trative expense.” §522(c), (k).
Section 522(d) of the Code provides a number of exemp
tions unless they are specifically prohibited by state law.
§522(b)(2), (d). One, commonly known as the “homestead
exemption,” protects up to $22,975 in equity in the debt
or’s residence. §522(d)(1) and note following §522; see
Owen v. Owen,
500 U.S. 305, 310 (1991). The debtor may
elect, however, to forgo the §522(d) exemptions and in
stead claim whatever exemptions are available under
applicable state or local law. §522(b)(3)(A). Some States
provide homestead exemptions that are more generous
than the federal exemption; some provide less generous
versions; but nearly every State provides some type of
homestead exemption. See López, State Homestead Ex
emptions and Bankruptcy Law: Is It Time for Congress To
Close the Loophole? 7 Rutgers Bus. L. J. 143, 149–165
(2010) (listing state exemptions).
B
Petitioner, Stephen Law, filed for Chapter 7 bankruptcy
in 2004, and respondent, Alfred H. Siegel, was appointed
to serve as trustee. The estate’s only significant asset was
Law’s house in Hacienda Heights, California. On a sched
ule filed with the Bankruptcy Court, Law valued the
house at $363,348 and claimed that $75,000 of its value
was covered by California’s homestead exemption. See
Cal. Civ. Proc. Code Ann. §704.730(a)(1) (West Supp.
2014). He also reported that the house was subject to two
voluntary liens: a note and deed of trust for $147,156.52 in
favor of Washington Mutual Bank, and a second note and
deed of trust for $156,929.04 in favor of “Lin’s Mortgage &
Cite as: 571 U. S. ____ (2014) 3
Opinion of the Court
Associates.” Law thus represented that there was no
equity in the house that could be recovered for his other
creditors, because the sum of the two liens exceeded the
house’s nonexempt value.
If Law’s representations had been accurate, he presum
ably would have been able to retain the house, since Siegel
would have had no reason to pursue its sale. Instead, a
few months after Law’s petition was filed, Siegel initiated
an adversary proceeding alleging that the lien in favor of
“Lin’s Mortgage & Associates” was fraudulent. The deed
of trust supporting that lien had been recorded by Law in
1999 and reflected a debt to someone named “Lili Lin.”
Not one but two individuals claiming to be Lili Lin ulti
mately responded to Siegel’s complaint. One, Lili Lin of
Artesia, California, was a former acquaintance of Law’s
who denied ever having loaned him money and described
his repeated efforts to involve her in various sham trans
actions relating to the disputed deed of trust. That Lili
Lin promptly entered into a stipulated judgment disclaim
ing any interest in the house. But that was not the end of
the matter, because the second “Lili Lin” claimed to be the
true beneficiary of the disputed deed of trust. Over the
next five years, this “Lili Lin” managed—despite suppos
edly living in China and speaking no English—to engage
in extensive and costly litigation, including several ap
peals, contesting the avoidance of the deed of trust and
Siegel’s subsequent sale of the house.
Finally, in 2009, the Bankruptcy Court entered an order
concluding that “no person named Lili Lin ever made a
loan to [Law] in exchange for the disputed deed of trust.”
In re Law,
401 B.R. 447, 453 (Bkrtcy. Ct. CD Cal.). The
court found that “the loan was a fiction, meant to preserve
[Law’s] equity in his residence beyond what he was enti
tled to exempt” by perpetrating “a fraud on his creditors
and the court.”
Ibid. With regard to the second “Lili Lin,”
the court declared itself “unpersuaded that Lili Lin of
4 LAW v. SIEGEL
Opinion of the Court
China signed or approved any declaration or pleading
purporting to come from her.”
Ibid. Rather, it said, the
“most plausible conclusion” was that Law himself had
“authored, signed, and filed some or all of these papers.”
Ibid. It also found that Law had submitted false evidence
“in an effort to persuade the court that Lili Lin of China—
rather than Lili Lin of Artesia—was the true holder of the
lien on his residence.”
Id., at 452. The court determined
that Siegel had incurred more than $500,000 in attorney’s
fees overcoming Law’s fraudulent misrepresentations. It
therefore granted Siegel’s motion to “surcharge” the en
tirety of Law’s $75,000 homestead exemption, making
those funds available to defray Siegel’s attorney’s fees.
The Ninth Circuit Bankruptcy Appellate Panel affirmed.
BAP No. CC–09–1077–PaMkH,
2009 WL 7751415 (Oct.
22, 2009) ( per curiam). It held that the Bankruptcy
Court’s factual findings regarding Law’s fraud were not
clearly erroneous and that the court had not abused its
discretion by surcharging Law’s exempt assets. It ex
plained that in Latman v. Burdette,
366 F.3d 774 (2004),
the Ninth Circuit had recognized a bankruptcy court’s
power to “equitably surcharge a debtor’s statutory ex
emptions” in exceptional circumstances, such as “when a
debtor engages in inequitable or fraudulent conduct.”
2009
WL 7751415, *5, *7. The Bankruptcy Appellate Panel
acknowledged that the Tenth Circuit had disagreed with
Latman, see In re Scrivner,
535 F.3d 1258, 1263–1265
(2008), but the panel affirmed that Latman was correct.
2009 WL 7751415, *7, n. 10. Judge Markell filed a con
curring opinion agreeing with the panel’s application of
Latman but questioning “whether Latman remains good
policy.”
2009 WL 7751415, *10.
The Ninth Circuit affirmed. In re Law, 435 Fed. Appx.
697 (2011) ( per curiam). It held that the surcharge was
proper because it was “calculated to compensate the estate
for the actual monetary costs imposed by the debtor’s
Cite as: 571 U. S. ____ (2014) 5
Opinion of the Court
misconduct, and was warranted to protect the integrity of
the bankruptcy process.”
Id., at 698. We granted certiorari.
570 U. S. ___ (2013).
II. Analysis
A
A bankruptcy court has statutory authority to “issue
any order, process, or judgment that is necessary or ap
propriate to carry out the provisions of ” the Bankruptcy
Code.
11 U.S. C. §105(a). And it may also possess “inher
ent power . . . to sanction ‘abusive litigation practices.’ ”
Marrama v. Citizens Bank of Mass.,
549 U.S. 365, 375–
376 (2007). But in exercising those statutory and inherent
powers, a bankruptcy court may not contravene specific
statutory provisions.
It is hornbook law that §105(a) “does not allow the
bankruptcy court to override explicit mandates of other
sections of the Bankruptcy Code.” 2 Collier on Bankruptcy
¶105.01[2], p. 105–6 (16th ed. 2013). Section 105(a) con
fers authority to “carry out” the provisions of the Code, but
it is quite impossible to do that by taking action that the
Code prohibits. That is simply an application of the axiom
that a statute’s general permission to take actions of a
certain type must yield to a specific prohibition found
elsewhere. See Morton v. Mancari,
417 U.S. 535, 550–551
(1974); D. Ginsberg & Sons, Inc. v. Popkin,
285 U.S. 204,
206–208 (1932).1 Courts’ inherent sanctioning powers are
——————
1 The second sentence of §105(a) adds little to the analysis. It states:
“No provision of this title providing for the raising of an issue by a
party in interest shall be construed to preclude the court from,
sua sponte, taking any action or making any determination necessary
or appropriate to enforce or implement court orders or rules, or to
prevent an abuse of process.” Even if the “abuse of process” language
were deemed to confer additional authority beyond that conferred by
the first sentence (which is doubtful), that general authority would also
be limited by more specific provisions of the Code.
6 LAW v. SIEGEL
Opinion of the Court
likewise subordinate to valid statutory directives and
prohibitions. Degen v. United States,
517 U.S. 820, 823
(1996); Chambers v. NASCO, Inc.,
501 U.S. 32, 47 (1991).
We have long held that “whatever equitable powers
remain in the bankruptcy courts must and can only be
exercised within the confines of ” the Bankruptcy Code.
Norwest Bank Worthington v. Ahlers,
485 U.S. 197, 206
(1988); see, e.g., Raleigh v. Illinois Dept. of Revenue,
530
U.S. 15, 24–25 (2000); United States v. Noland,
517 U.S.
535, 543 (1996); SEC v. United States Realty & Improve-
ment Co.,
310 U.S. 434, 455 (1940).
Thus, the Bankruptcy Court’s “surcharge” was unau
thorized if it contravened a specific provision of the Code.
We conclude that it did. Section 522 (by reference to
California law) entitled Law to exempt $75,000 of equity
in his home from the bankruptcy estate. §522(b)(3)(A).
And it made that $75,000 “not liable for payment of any
administrative expense.” §522(k).2 The reasonable attor
ney’s fees Siegel incurred defeating the “Lili Lin” lien were
indubitably an administrative expense, as a short march
through a few statutory cross-references makes plain:
Section 503(b)(2) provides that administrative expenses
include “compensation . . . awarded under” §330(a);
§330(a)(1) authorizes “reasonable compensation for actual,
necessary services rendered” by a “professional person
employed under” §327; and §327(a) authorizes the trustee
to “employ one or more attorneys . . . to represent or assist
the trustee in carrying out the trustee’s duties under this
title.” Siegel argues that even though attorney’s fees
incurred responding to a debtor’s fraud qualify as “admin
istrative expenses” for purposes of determining the trus
——————
2 The statute’s general rule that exempt assets are not liable for
administrative expenses is subject to two narrow exceptions, both per
taining to the use of exempt assets to pay expenses associated with the
avoidance of certain voidable transfers of exempt property. §522(k)(1)–
(2). Neither of those exceptions is relevant here.
Cite as: 571 U. S. ____ (2014) 7
Opinion of the Court
tee’s right to reimbursement under §503(b), they do not so
qualify for purposes of §522(k); but he gives us no reason
to depart from the “ ‘normal rule of statutory construc
tion’ ” that words repeated in different parts of the same
statute generally have the same meaning. See Depart-
ment of Revenue of Ore. v. ACF Industries, Inc.,
510 U.S.
332, 342 (1994) (quoting Sorenson v. Secretary of Treasury,
475 U.S. 851, 860 (1986)).
The Bankruptcy Court thus violated §522’s express
terms when it ordered that the $75,000 protected by Law’s
homestead exemption be made available to pay Siegel’s
attorney’s fees, an administrative expense. In doing so,
the court exceeded the limits of its authority under §105(a)
and its inherent powers.
B
Siegel does not dispute the premise that a bankruptcy
court’s §105(a) and inherent powers may not be exercised
in contravention of the Code. Instead, his main argument
is that the Bankruptcy Court’s surcharge did not contra
vene §522. That statute, Siegel contends, “establish[es]
the procedure by which a debtor may seek to claim exemp
tions” but “contains no directive requiring [courts] to allow
[an exemption] regardless of the circumstances.” Brief for
Respondent 35. Thus, he says, recognition of an equitable
power in the Bankruptcy Court to deny an exemption by
“surcharging” the exempt property in response to the
debtor’s misconduct can coexist comfortably with §522.
The United States, appearing in support of Siegel, agrees,
arguing that §522 “neither gives debtors an absolute right
to retain exempt property nor limits a court’s authority to
impose an equitable surcharge on such property.” Brief
for United States as Amicus Curiae 23.
Insofar as Siegel and the United States equate the
Bankruptcy Court’s surcharge with an outright denial of
Law’s homestead exemption, their arguments founder
8 LAW v. SIEGEL
Opinion of the Court
upon this case’s procedural history. The Bankruptcy
Appellate Panel stated that because no one “timely op
pose[d] [Law]’s homestead exemption claim,” the exemp
tion “became final” before the Bankruptcy Court imposed
the surcharge.
2009 WL 7751415, at *2. We have held
that a trustee’s failure to make a timely objection prevents
him from challenging an exemption. Taylor v. Freeland &
Kronz,
503 U.S. 638, 643–644 (1992).
But even assuming the Bankruptcy Court could have
revisited Law’s entitlement to the exemption, §522 does
not give courts discretion to grant or withhold exemptions
based on whatever considerations they deem appropriate.
Rather, the statute exhaustively specifies the criteria that
will render property exempt. See §522(b), (d). Siegel
insists that because §522(b) says that the debtor “may
exempt” certain property, rather than that he “shall be
entitled” to do so, the court retains discretion to grant or
deny exemptions even when the statutory criteria are met.
But the subject of “may exempt” in §522(b) is the debtor,
not the court, so it is the debtor in whom the statute vests
discretion. A debtor need not invoke an exemption to
which the statute entitles him; but if he does, the court
may not refuse to honor the exemption absent a valid
statutory basis for doing so.
Moreover, §522 sets forth a number of carefully cali
brated exceptions and limitations, some of which relate to
the debtor’s misconduct. For example, §522(c) makes
exempt property liable for certain kinds of prepetition
debts, including debts arising from tax fraud, fraud in
connection with student loans, and other specified types of
wrongdoing. Section 522(o) prevents a debtor from claim
ing a homestead exemption to the extent he acquired the
homestead with nonexempt property in the previous 10
years “with the intent to hinder, delay, or defraud a credi
tor.” And §522(q) caps a debtor’s homestead exemption at
approximately $150,000 (but does not eliminate it en
Cite as: 571 U. S. ____ (2014) 9
Opinion of the Court
tirely) where the debtor has been convicted of a felony that
shows “that the filing of the case was an abuse of the
provisions of ” the Code, or where the debtor owes a debt
arising from specified wrongful acts—such as securities
fraud, civil violations of the Racketeer Influenced and
Corrupt Organizations Act, or “any criminal act, inten
tional tort, or willful or reckless misconduct that caused
serious physical injury or death to another individual
in the preceding 5 years.” §522(q) and note following
§522. The Code’s meticulous—not to say mind-numbingly
detailed—enumeration of exemptions and exceptions to
those exemptions confirms that courts are not authorized
to create additional exceptions. See Hillman v. Maretta,
569 U. S. ___, ___ (2013) (slip op., at 12); TRW Inc. v.
Andrews,
534 U.S. 19, 28–29 (2001).
Siegel points out that a handful of courts have claimed
authority to disallow an exemption (or to bar a debtor from
amending his schedules to claim an exemption, which is
much the same thing) based on the debtor’s fraudulent
concealment of the asset alleged to be exempt. See, e.g.,
In re Yonikus,
996 F.2d 866, 872–873 (CA7 1993); In re
Doan,
672 F.2d 831, 833 (CA11 1982) ( per curiam); Stew-
art v. Ganey,
116 F.2d 1010, 1011 (CA5 1940). He sug
gests that those decisions reflect a general, equitable
power in bankruptcy courts to deny exemptions based on a
debtor’s bad-faith conduct. For the reasons we have given,
the Bankruptcy Code admits no such power. It is of course
true that when a debtor claims a state-created exemption,
the exemption’s scope is determined by state law, which
may provide that certain types of debtor misconduct war
rant denial of the exemption. E.g., In re Sholdan,
217
F.3d 1006, 1008 (CA8 2000); see 4 Collier on Bankruptcy
¶522.08[1]–[2], at 522–45 to 522–47. Some of the early
decisions on which Siegel relies, and which the Fifth Cir
cuit cited in Stewart, are instances in which federal courts
applied state law to disallow state-created exemptions.
10 LAW v. SIEGEL
Opinion of the Court
See In re Denson,
195 F. 857, 858 (ND Ala. 1912); Cowan
v. Burchfield,
180 F. 614, 619 (ND Ala. 1910); In re Ansley
Bros.,
153 F. 983, 984 (EDNC 1907). But federal law
provides no authority for bankruptcy courts to deny an
exemption on a ground not specified in the Code.
C
Our decision in Marrama v. Citizens Bank, on which
Siegel and the United States heavily rely, does not point
toward a different result. The question there was whether
a debtor’s bad-faith conduct was a valid basis for a bank
ruptcy court to refuse to convert the debtor’s bankruptcy
from a liquidation under Chapter 7 to a reorganization
under Chapter 13. Although §706(a) of the Code gave the
debtor a right to convert the case, §706(d) “expressly
conditioned” that right on the debtor’s “ability to qualify as
a ‘debtor’ under Chapter
13.” 549 U.S., at 372. And
§1307(c) provided that a proceeding under Chapter 13
could be dismissed or converted to a Chapter 7 proceeding
“for cause,” which the Court interpreted to authorize
dismissal or conversion for bad-faith conduct. In light of
§1307(c), the Court held that the debtor’s bad faith could
stop him from qualifying as a debtor under Chapter 13,
thus preventing him from satisfying §706(d)’s express
condition on conversion.
Id., at 372–373. That holding
has no relevance here, since no one suggests that Law
failed to satisfy any express statutory condition on his
claiming of the homestead exemption.
True, the Court in Marrama also opined that the Bank
ruptcy Court’s refusal to convert the case was authorized
under §105(a) and might have been authorized under the
court’s inherent powers.
Id., at 375–376. But even that
dictum does not support Siegel’s position. In Marrama,
the Court reasoned that if the case had been converted to
Chapter 13, §1307(c) would have required it to be either
dismissed or reconverted to Chapter 7 in light of the debt
Cite as: 571 U. S. ____ (2014) 11
Opinion of the Court
or’s bad faith. Therefore, the Court suggested, even if the
Bankruptcy Court’s refusal to convert the case had not
been expressly authorized by §706(d), that action could
have been justified as a way of providing a “prompt, rather
than a delayed, ruling on [the debtor’s] unmeritorious at
tempt to qualify” under §1307(c).
Id., at 376. At most,
Marrama’s dictum suggests that in some circumstances a
bankruptcy court may be authorized to dispense with
futile procedural niceties in order to reach more expedi
tiously an end result required by the Code. Marrama
most certainly did not endorse, even in dictum, the view
that equitable considerations permit a bankruptcy court to
contravene express provisions of the Code.
D
We acknowledge that our ruling forces Siegel to shoul
der a heavy financial burden resulting from Law’s egre
gious misconduct, and that it may produce inequitable
results for trustees and creditors in other cases. We have
recognized, however, that in crafting the provisions of
§522, “Congress balanced the difficult choices that exemp
tion limits impose on debtors with the economic harm that
exemptions visit on creditors.” Schwab v. Reilly,
560 U.S.
770, 791 (2010). The same can be said of the limits im
posed on recovery of administrative expenses by trustees.
For the reasons we have explained, it is not for courts to
alter the balance struck by the statute. Cf. Guidry v.
Sheet Metal Workers Nat. Pension Fund,
493 U.S. 365,
376–377 (1990).
* * *
Our decision today does not denude bankruptcy courts
of the essential “authority to respond to debtor misconduct
with meaningful sanctions.” Brief for United States as
Amicus Curiae 17. There is ample authority to deny the
dishonest debtor a discharge. See §727(a)(2)–(6). (That
12 LAW v. SIEGEL
Opinion of the Court
sanction lacks bite here, since by reason of a postpetition
settlement between Siegel and Law’s major creditor, Law
has no debts left to discharge; but that will not often be
the case.) In addition, Federal Rule of Bankruptcy Pro
cedure 9011—bankruptcy’s analogue to Civil Rule 11—
authorizes the court to impose sanctions for bad-faith
litigation conduct, which may include “an order directing
payment. . . of some or all of the reasonable attorneys’ fees
and other expenses incurred as a direct result of the viola
tion.” Fed. Rule Bkrtcy. Proc. 9011(c)(2). The court may
also possess further sanctioning authority under either
§105(a) or its inherent powers. Cf.
Chambers, 501 U.S.,
at 45–49. And because it arises postpetition, a bankruptcy
court’s monetary sanction survives the bankruptcy case
and is thereafter enforceable through the normal proce
dures for collecting money judgments. See §727(b). Fraud
ulent conduct in a bankruptcy case may also subject a debtor
to criminal prosecution under
18 U.S. C. §152, which
carries a maximum penalty of five years’ imprisonment.
But whatever other sanctions a bankruptcy court may
impose on a dishonest debtor, it may not contravene ex
press provisions of the Bankruptcy Code by ordering that
the debtor’s exempt property be used to pay debts and
expenses for which that property is not liable under the
Code.
The judgment of the Court of Appeals is reversed, and
the case is remanded for further proceedings consistent
with this opinion.
It is so ordered.