Michigan Bankruptcy Blog
On January 14, 2021, the U.S. Supreme Court decided City of Chicago, Illinois v. Fulton (Case No. 19-357, Jan. 14, 2021), a case which examined whether merely retaining estate property after a bankruptcy filing violates the automatic stay provided for by §362(a) of the Bankruptcy Code. The Court overruled the bankruptcy court and U.S. Court of Appeals for the Seventh Circuit in deciding that mere retention of property does not violate the automatic stay.
Case Background
The City of Chicago (the “City”) impounded respondents’ vehicles for failure to pay fines for motor vehicle infractions. Thereafter, each respondent filed a Chapter 13 bankruptcy petition and requested the return of their vehicle. The City refused to return the vehicles, and the bankruptcy court in each case found the City’s refusal to be a violation of automatic stay. The Seventh Circuit affirmed, concluding that by retaining possession of the debtors’ vehicles after they declared bankruptcy, the City had acted “to exercise control over” the debtors’ property in violation of the automatic stay.
