Impound Must Return Vehicles During Chapter 13 Bankruptcy

impounded carsOn June 19, 2019, the United States Court of Appeals for the Seventh Circuit rendered its decision that the city of Chicago violated the Bankruptcy Code’s automatic stay provision when it continued to hold cars belonging to individuals who had filed for Chapter 13 Bankruptcy. [1] This decision was the result of a consolidated appeal of four bankruptcy cases which arose when Chicago refused to return vehicles impounded for failure to pay multiple traffic tickets.  The City argued that in ordered to properly maintain their lien on the debtor’s vehicles and ensure payment of the fines, the City needed to maintain possession.  However, the Court of Appeals disagreed stating that the City was exercising control over property of the bankruptcy estate and that none of the exceptions to the automatic stay provision applied in this case.  As such, the Court required the City to return all of the debtor’s vehicles and even imposed sanctions against the city for violating the automatic stay period.

After this ruling it appears thousands of Chicago drivers should be able to get their vehicles out of city impounds immediately without first paying off their traffic fines.  Further, this case will likely serve as a warning beacon to other cities thinking about taking a similar course of action.  However, while the Court did state this decision was in accordance with prior precedence, it is uncertain if the City of Chicago will be appealing this decision to the Supreme Court or if the Supreme Court would even accept such an appeal.  So, for now at least, it appears Chicago and other city impounds will be busy returning vehicles for the foreseeable future.

For more information regarding violations of the Bankruptcy Code’s automatic stay provision or other legal matters, contact Sherer Law Offices at (618) 692-6656. 


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