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The U.S. Supreme Court. (Courthouse News photo/Jack Rodgers)
WASHINGTON (CN) Debtors are not entitled to immediately reunite with their impounded property once they declare bankruptcy, the U.S. Supreme Court ruled Thursday.
The 8-0 decision settles four separate bankruptcy cases where Robbin Fulton and others saw their vehicles were impounded by the city of Chicago, refused to pay the fines and then declared bankruptcy.
Section 362 of the U.S. Bankruptcy Code prohibits collection activity against those who claim to be indigent, but the Supreme Court ruled Thursday that the mere retention of a debtor’s property once bankruptcy proceedings are underway does not violate the law.
Supreme Court Rules on Seized Property in Bankruptcy
The Supreme Court has ruled that debtors aren’t entitled to have impounded property immediately returned to them as soon as they declare bankruptcy.
The 8–0 opinion in the case known as City of Chicago v. Fulton was written by Justice Samuel Alito. Justice Amy Coney Barrett, who wasn’t yet a member of the high court when the case was argued on Oct. 13, 2020, didn’t participate in the case. Justice Sonia Sotomayor filed a separate, concurring opinion.
When a debtor files a petition for bankruptcy, the U.S. Bankruptcy Code protects the debtor’s interests by imposing an automatic stay “applicable to all entities” on efforts to collect pre-petition debts outside the bankruptcy proceeding. Efforts to exercise control over the property of the bankruptcy estate are forbidden.
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