BANKRUPTCY CORNER
You Can Hold On To That
JASON S . RIGOLI
The United States Supreme Court has resolved a circuit split of whether the mere retention of property violates the automatic stay in 11 U . S . C . § 362 ( a )( 3 ), answering that it does not . City of Chicago v . Fulton , Case No . 19-357 , -- S . Ct . -- , 2021 U . S . LEXIS 496 , 2021 WL 125106 ( 2021 ).
The filing of a bankruptcy petition automatically creates an estate containing all of the debtor ’ s “ legal and equitable interests in property ,” with some exceptions , and automatically stays all efforts to collect prepetition debts outside of bankruptcy . See 11 U . S . C . §§ 362 ( a ) and 541 ( a ). See also Fulton , 2021 U . S . LEXIS 496 at * 4-5 . Prohibited by the stay is “ any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate .” 11 U . S . C . § 362 ( a )( 3 ). This prohibition is the central issue in dispute in
Fulton .
Fulton was an appeal out of the 7th Circuit with respect to four bankruptcies where the City of Chicago refused to turnover vehicles it had impounded , prepetition , for each debtor ’ s failure to pay fines for motor vehicle infractions . Id . at * 5 . A split among several circuits emerged in such situations , with some circuits imposing an affirmative duty on the creditor to turn the repossessed property over to the Debtor or the creditor was violating the stay , while other circuits held that the creditors retention was not a violation of the automatic stay .
The Supreme Court found that the plain language of § 362 ( a )( 3 ) requires the creditor to take affirmative steps to exercise control over property of the estate . Id . at * 6-12 . In retaining the property that had been repossessed prepetition the creditor is maintaining the status quo , which is the mandate of § 362 .
The Supreme Court , however , was explicit to note that it was not determining the “ meaning of other subsections of § 362 ( a ) [,]” or “ how the turnover obligation in § 542 operates .” Fulton , at * 12 .
The Palm Beach County Bar Association ’ s Judicial Relations Committee and Young Lawyers Section present
A Three-Part CLE Seminar for Attorneys for Practicing 0-3 Years Zoom to Judgment Monday , March 8th - Part 3 12:00 P . M . - 1:00 P . M . Live on Zoom
Panelists : Honorable G . Joseph Curley , 15th Circuit Honorable James Nutt , 15th Circuit Moderators Bridget Berry , Esq , Greenberg Traurig , P . A . Lauren Johnson , McCabe Rabin , P . A . Session III Focus :
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This article submitted by Jason S . Rigoli , Furr and Cohen , P . A ., 2255 Glades Road , Suite 301E , Boca Raton , FL 33431 , jrigoli @ furrcohen . com
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