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19-357 CITY OF CHICAGO V. FULTON DECISION BELOW: 926 F3d. 916 PRESS RELEASE OF APRIL 3, 2020 IN KEEPING WITH PUBLIC HEALTH GUIDANCE IN RESPONSE TO COVID-19, THE COURT WILL POSTPONE THE ORAL ARGUMENTS CURRENTLY SCHEDULED FOR THE APRIL SESSION. 4/13/2020: ARGUMENT TO BE RESCHEDULED FOR THE OCTOBER TERM 2020 CERT. GRANTED 12/18/2019 QUESTION PRESENTED: Whether an entity that is passively retaining possession of property in which a bankruptcy estate has an interest has an affirmative obligation under the Bankruptcy Code's automatic stay, 11 U.S.C § 362, to return that property to the debtor or trustee immediately upon the filing of the bankruptcy petition. LOWER COURT CASE NUMBER: 18-2527, 18-2793, 18-2835, 18-3023
In the case of City of Chicago, Illinois v. Fulton (2020), the U.S Supreme Court ruled in favor of the city, stating that it did not violate bankruptcy law by retaining impounded vehicles after their owners filed for bankruptcy. The court held that merely retaining possession of a debtor's property after a bankruptcy petition is filed does not constitute an act to exercise control over property of the estate in violation of Section 362(a)(3) under Bankruptcy Code. This decision overturned rulings from lower courts which had found that keeping hold on such assets violated automatic stay provisions designed to prevent creditors from trying to collect debts while a debtor reorganizes finances during bankruptcy proceedings.
In the dissenting opinion for City of Chicago, Illinois v. Fulton, Justice Sotomayor argued that the majority's interpretation of Section 362(a)(3) was too narrow and failed to protect debtors as intended by Congress. She contended that this section should be interpreted to include not only acts to gain control over a debtor’s property but also any act to maintain such control. According to her, when a creditor refuses turnover requests after being notified about bankruptcy proceedings, it is exercising control over the debtor's property in violation of Section 362(a)(3). Therefore she disagreed with the majority ruling which held that mere retention does not violate this provision. Furthermore, she expressed concern that this decision could encourage obstinate behavior from creditors who might refuse turnover requests knowing they will face no immediate sanction under automatic stay provisions.