U.S. Supreme Court Will Hear an Automatic Stay Case

The U.S. Supreme Court recently granted certiorari to a bankruptcy case out of Chicago concerning the automatic stay. In other words, the U.S. Supreme Court agreed to hear the case, City of Chicago v. Fulton. The U.S. Court of Appeals for the Seventh Circuit most recently heard and ruled on the case, which involves a question about the automatic stay in a Chapter 13 bankruptcy case. We want to tell you more about the case and to discuss its possible implications for consumers in Oak Park moving forward.

Getting the Facts About City of Chicago v. Fulton
The present case, involves a situation in which a debtor’s car was towed and impounded, and the vehicle was not returned to the debtor once she filed for Chapter 13 bankruptcy, which is required under the automatic stay. Here are the basic facts of the case. Robbin Fulton, the debtor, had a citation for driving on a suspended license. The City of Chicago towed and impounded Fulton’s car in connection with that citation. Then Fulton filed for Chapter 13 bankruptcy, and listed the City of Chicago as an unsecured creditor. In connection with the bankruptcy petition, the City of Chicago filed an unsecured proof of claim. Fulton’s reorganization plan was confirmed by the bankruptcy court. Afterward, the City of Chicago amended the proof of claim and said it was actually a secured creditor, and as such would not return Fulton’s vehicle.

Fulton filed a claim. The bankruptcy court cited an earlier Seventh Circuit case, Thompson v. General Motors Acceptance Corp. (2009). In that case, the Seventh Circuit said “a creditor must comply with the automatic stay and return a debtor’s vehicle upon her filing of a bankruptcy petition,” according to Oyez.org. The City appealed, and the Seventh Circuit affirmed the bankruptcy court’s ruling.

Now, the U.S. Supreme Court will need to determine whether the automatic stay requires a creditor like the City of Chicago, which is “passively retaining possession of property in which a bankruptcy estate has an interest,” to return the property to the debtor or the bankruptcy trustee when the bankruptcy petition is filed.

What is the Automatic Stay in a Bankruptcy Case?
What is the automatic stay precisely, and what does it do? The automatic stay under the U.S. Bankruptcy Code prevents creditors from continuing to take any kind of collection or enforcement action against a debtor once that debtor has filed for consumer bankruptcy protection. More specifically, the automatic stay prohibits all of the following:

  • Commencement or continuation of a proceeding against the debtor for a debt owed prior to the filing of the bankruptcy case;
  • Enforcement of a judgement obtained against the debt prior to when the debtor filed for bankruptcy;
  • Action to obtain possession of the debtor’s property or property of the bankruptcy estate, including any type of repossession;
  • Action to create, perfect, or enforce a lien against the property of the debtor;
  • Action to collect, assess, or recover a claim against the debtor for a debt that occurred prior to the bankruptcy filing;
  • Setoff of any debt that arose prior to the bankruptcy case; and
  • Commencement or continuation of an action concerning the debtor’s tax liability before the United States Tax Court.

Contact an Oak Park Bankruptcy Lawyer
Depending upon how the U.S. Supreme Court rules, this case could have significant implications for debtors who file for Chapter 13 bankruptcy. If you have questions or need help with your case, a bankruptcy lawyer in Oak Park can help you. Contact the Emerson Law Firm for more information.



See Related Blog Posts:

Seventh Circuit Case Allows Consumer to Bring Second FDCPA Lawsuit

10 Things You Should Know About Consumer Bankruptcy

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