The 7th US Circuit Court of Appeals ruled against Chicago city official’s practice of keeping impounded cars from debtors after they’ve filed for bankruptcy. A report from ProPublica in Illinois helped discover that thousands of debtors, mostly black and low-income, were forced into a Chapter 13 bankruptcy filing. Most of the debt the judges discovered, drawing on an investigative article by ProPublica, accumulated from “unpaid parking and automated traffic camera tickets”.
In a Chapter 13 bankruptcy, under the automatic stay, the vehicle would be released to the motorist once they filed, but the city violated this bankruptcy law. The cars were kept in impound so that the city could continue to collect on the fees by holding the car while putting pressure on the motorists to repay the tickets. Further, the city persisted to make repaying the tickets as a priority in the motorist’s bankruptcy plan.
As ProPublica pointed out in their article “Chicago Can’t Hold Impounded Vehicles After Drivers File for Bankruptcy, Court Says” this process “often took months and left many people
unable to get to work”. The city’s plan was likely to reduce the amount of bankruptcy filings while increasing its own revenue, but this backfired. Eugene Wedoff, “a retired chief bankruptcy judge for the Northern District of Illinois” argued on behalf of the debtors for their appeal. The city argued that going case by case through each bankruptcy filing would be burdensome, as well as the position that keeping the cars would prevent bad drivers on the road.
The three judge panel of the Appeals Court addressed the city’s arguments in their statement: ‘“The City’s argument that it will be overburdened with responding to Chapter 13 petitions is
ultimately unavailing; any burden is a consequence of the Bankruptcy Code’s focus on protecting debtors and on preserving property of the estate for the benefit of all creditors . . .’”. Of the point of public safety, the judges found that violations that result in impounded cars, even suspended licenses, were not an issue of bad driving.
Mayor Lightfood’s administration stated they were looking for more “progressive” ways to collect ticket fines without having to resort to these extortionist measures. However, even before her campaign, the city was trying to steer debtors away from filing for a Chapter 13, in which ticket debt can be entirely removed.
Source credit: https://www.propublica.org/article/chicago-drivers-bankruptcies-impounded-vehicles-federal-appeals-court