In Re Fulton

926 F.3d 916 (7th Cir. 2019)

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Nature of the Case

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Facts

The Chicago Municipal Code permits D to immobilize and then impound a vehicle if its owner has three or more 'final determinations of liability,' or two final determinations that are over a year old, 'for parking, standing, compliance, automated traffic law enforcement system, or automated speed enforcement system violation[s].' Failure to pay the fine within twenty-five days automatically doubles the penalty. After a vehicle is impounded, the owner is further subjected to towing and storage fees and to D's costs and attorney's fees for collection activity. An owner may either pay the fines, towing and storage fees, and collection costs and fees in full, or pay the full amount via an installment plan over a period of up to thirty-six months, provided she makes an initial payment of half the fines and penalties plus all of the impoundment, towing, and storage charges. D amended the Code to include: 'Any vehicle impounded by the City or its designee shall be subject to a possessory lien in favor of D in the amount required to obtain the release of the vehicle.' This was done because people were declaring bankruptcy to avoid extortion. D then began refusing to release impounded vehicles to debtors who had filed Chapter 13 petitions. This case represents 4 such cases. Fulton (P) uses a vehicle to commute to work, transport her young daughter to day care, and care for her elderly parents on weekends. Three weeks after she purchased a 2015 Kia Soul, the City towed and impounded the vehicle for a prior citation of driving on a suspended license. Fulton filed a Chapter 13 bankruptcy petition on January 31, 2018, and filed a plan on February 5, treating the City as a general unsecured creditor. D filed a general unsecured proof of claim on February 23 for $9,391.20. The court confirmed P's plan on March 21, she requested D turn over her vehicle. D then amended its proof of claim to add impound fees, for a total of $11,831.20, and to assert its status as a secured creditor; it did not return D's vehicle. D claimed it was retaining possession to perfect its possessory lien and was thus excepted from the automatic stay pursuant to 11 U.S.C. § 362(b)(3). The bankruptcy court ordered D to return P's vehicle and imposed a sanction of $100 for every day the City failed to comply, and sustained P's objection to D's claim as a secured creditor. D moved to stay the order in the district court pending appeal; the district court denied the stay request on September 10. D returned P's vehicle. At no point did D initiate proceedings to protect its rights under § 363(e). In each of four cases, D appealed the bankruptcy courts' orders finding D violated the stay. These cases have been consolidated for appeal.