City of Chicago v. Robbin L. Fulton

In the

United States Court of Appeals
For the Seventh Circuit
____________________

No. 18‐2527
IN RE: ROBBIN L. FULTON,
Debtor‐Appellee.
APPEAL OF: CITY OF CHICAGO
____________________

Appeal from the United States Bankruptcy Court
for the Northern District of Illinois, Eastern Division.
No. 18‐02860 — Jack B. Schmetterer, Bankruptcy Judge.
____________________
No. 18‐2793
IN RE: JASON S. HOWARD,
Debtor‐Appellee.
APPEAL OF: CITY OF CHICAGO
____________________

Appeal from the United States Bankruptcy Court
for the Northern District of Illinois, Eastern Division.
No. 17‐25141 — Jacqueline P. Cox, Bankruptcy Judge.
____________________
2 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

No. 18‐2835
IN RE: GEORGE PEAKE,
Debtor‐Appellee.
APPEAL OF: CITY OF CHICAGO
____________________

Appeal from the United States Bankruptcy Court
for the Northern District of Illinois, Eastern Division.
No. 18‐16544 — Deborah Lee Thorne, Bankruptcy Judge.
____________________
No. 18‐3023
IN RE: TIMOTHY SHANNON,
Debtor‐Appellee.
APPEAL OF: CITY OF CHICAGO
____________________

Appeal from the United States Bankruptcy Court
for the Northern District of Illinois, Eastern Division.
No. 18‐04116 — Carol A. Doyle, Chief Bankruptcy Judge.
____________________

ARGUED MAY 14, 2019 — DECIDED JUNE 19, 2019
____________________

Before FLAUM, KANNE, and SCUDDER, Circuit Judges.
FLAUM, Circuit Judge. In this consolidated appeal of four
Chapter 13 bankruptcies, we consider whether the City of
Chicago may ignore the Bankruptcy Code’s automatic stay
and continue to hold a debtor’s vehicle until the debtor pays
her outstanding parking tickets. Prior to the debtors’ filing for
bankruptcy, the City impounded each of their vehicles for
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 3

failure to pay multiple traffic fines. After the debtors filed
their Chapter 13 petitions, the City refused to return their ve‐
hicles, claiming it needed to maintain possession to continue
perfection of its possessory liens on the vehicles and that it
would only return the vehicles when the debtors paid in full
their outstanding fines. The bankruptcy courts each held that
the City violated the automatic stay by “exercising control”
over property of the bankruptcy estate and that none of the
exceptions to the stay applied. The courts ordered the City to
return debtors’ vehicles and imposed sanctions on the City for
violating the stay.
This is not our first time addressing this issue: in Thompson
v. General Motors Acceptance Corp., 566 F.3d 699 (7th Cir. 2009),
we held that a creditor must comply with the automatic stay
and return a debtor’s vehicle upon her filing of a bankruptcy
petition. We decline the City’s request to overrule Thompson.
We therefore affirm the bankruptcy courts’ judgments relying
on Thompson, and we also agree with the bankruptcy courts
that none of the exceptions to the stay apply.
I. Background
The Chicago Municipal Code permits creditor‐appellant
the City of Chicago to immobilize and then impound a vehicle
if its owner has three or more “final determinations of liabil‐
ity,” or two final determinations that are over a year old, “for
parking, standing, compliance, automated traffic law enforce‐
ment system, or automated speed enforcement system viola‐
tion[s].” Municipal Code of Chicago (“M.C.C.”) § 9‐100‐
120(b); see also id. § 9‐80‐240(a) (providing for impoundment
of vehicles “operated by a person with a suspended or re‐
voked driver’s license”). The fines for violations of the City’s
Traffic Code range from $25 (e.g., parallel parking violation)
4 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

to $500 (e.g., parking on a public street without displaying a
wheel tax license emblem). Id. § 9‐100‐020(b)–(c). Failure to
pay the fine within twenty‐five days automatically doubles
the penalty. Id. § 9‐100‐050(e). After a vehicle is impounded,
the owner is further subjected to towing and storage fees, see
id. § 9‐64‐250(c), and to the City’s costs and attorney’s fees for
collection activity. Id. §§ 1‐19‐020, 2‐14‐132(c)(1)(A). To re‐
trieve her vehicle, an owner may either pay the fines, towing
and storage fees, and collection costs and fees in full, id. § 2‐
14‐132(c)(1)(A), or pay the full amount via an installment plan
over a period of up to thirty‐six months, provided she makes
an initial payment of half the fines and penalties plus all of
the impoundment, towing, and storage charges. Id. § 9‐100‐
101(a)(2)–(3).
In 2016, the City amended the Code to include: “Any ve‐
hicle impounded by the City or its designee shall be subject to
a possessory lien in favor of the City in the amount required
to obtain release of the vehicle.” Id. § 9‐92‐080(f). Based on this
provision, the City began refusing to release impounded ve‐
hicles to debtors who had filed Chapter 13 petitions. That is
just what occurred in these four cases.
A. In re Fulton
Debtor‐appellee Robbin Fulton uses a vehicle to commute
to work, transport her young daughter to day care, and care
for her elderly parents on weekends. On December 24, 2017,
three weeks after she purchased a 2015 Kia Soul, the City
towed and impounded the vehicle for a prior citation of driv‐
ing on a suspended license. Fulton filed a Chapter 13 bank‐
ruptcy petition on January 31, 2018 and filed a plan on Febru‐
ary 5, treating the City as a general unsecured creditor. The
City filed a general unsecured proof of claim on February 23
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 5

for $9,391.20. After the court confirmed Fulton’s plan on
March 21, she requested the City turn over her vehicle. The
City then amended its proof of claim to add impound fees, for
a total of $11,831.20, and to assert its status as a secured cred‐
itor; it did not return Fulton’s vehicle.
On May 2, Fulton filed a motion for sanctions arguing the
City was required to turn over her vehicle pursuant to Thomp‐
son and that its failure to do so was sanctionable conduct. The
City countered that Fulton must seek turnover through an ad‐
versary proceeding. It asserted it was retaining possession to
perfect its possessory lien and was thus excepted from the au‐
tomatic stay pursuant to 11 U.S.C. § 362(b)(3).
On May 25, the bankruptcy court held that the City was
required to return Fulton’s vehicle under Thompson and that
the City was not excepted from the stay under § 362(b)(3). The
court ordered the City to turn over Fulton’s vehicle no later
than May 29, imposed a sanction of $100 for every day the
City failed to comply, and sustained Fulton’s objection to the
City’s claim as a secured creditor. The City moved to stay the
order in the district court pending appeal; the district court
denied the stay request on September 10. Eventually, the City
returned Fulton’s vehicle. At no point did the City initiate
proceedings to protect its rights under § 363(e).
B. In re Shannon
The City impounded debtor‐appellee Timothy Shannon’s
1997 Buick Park Avenue on January 8, 2018 for unpaid park‐
ing tickets. Shannon filed a Chapter 13 petition on February
15. On February 27, the City filed an unsecured proof of claim
for $3,160 in fines dating back to 1999. Shannon, in turn, filed
a proposed plan that did not include the City as a secured
6 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

creditor, to which the City did not object, and the court con‐
firmed the plan on May 1. When Shannon sought the return
of his vehicle, the City amended its proof of claim, adding
fines, storage, and towing fees for a total of $5,600, and stated
the claim was secured by its possession of Shannon’s vehicle.
Shannon filed a motion for sanctions on June 12, asserting
the stay required the City to turn over his vehicle. The court
granted his motion on September 7; it held the City’s claim
was unsecured because it did not object to the plan that char‐
acterized the debt as such. It also determined the City violated
the stay by failing to return Shannon’s vehicle, that the
§§ 362(b)(3) and (b)(4) exceptions to the stay did not apply,
and that the City further violated § 362(a)(4) and (a)(6) by re‐
taining the vehicle. The court noted the City was free to file a
motion seeking adequate protection of its lien. The City re‐
turned Shannon’s car and did not file any such motion.
C. In re Peake
Debtor‐appellee George Peake relies on his car to travel
approximately forty‐five miles from his home to work. The
City impounded his 2007 Lincoln MKZ for unpaid fines on
June 1, 2018. Peake filed a Chapter 13 petition on June 9. In
response, the City filed a secured proof of claim for $5,393.27
and asserted a possessory lien on his vehicle. After the City
refused Peake’s request to return his vehicle, he filed a motion
for sanctions and for turnover. On August 15, the bankruptcy
court granted the motion; it held that neither § 362(b)(3) nor
(b)(4) applied, so the City’s retention of Peake’s vehicle vio‐
lated the stay, and it ordered the City to release his vehicle
immediately. The City filed a motion to stay the order pend‐
ing appeal, which the court denied on August 22. The same
day, Peake filed a motion for civil contempt based on the
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 7

City’s refusal to release his vehicle. The court granted the mo‐
tion and entered an order requiring the City to pay monetary
sanctions—$100 per day from August 17 through August 22
and $500 per day thereafter until the City returned his vehicle.
The City filed an emergency motion for a stay pending appeal
in our Court, which we denied. Finally, the City released
Peake’s vehicle. At no point did the City file a motion to pro‐
tect its interest in the vehicle.
D. In re Howard
The City immobilized debtor‐appellee Jason Howard’s ve‐
hicle on August 9, 2017 and impounded it soon after. Howard
filed a Chapter 13 petition on August 22. The City filed a se‐
cured proof of claim on August 23 for $17,110.80. The court
confirmed Howard’s plan on October 16, which included a
nonpriority unsecured debt of $13,000 owed to the City for
parking tickets. Though the Code did not impose an auto‐
matic stay when Howard filed his petition due to his prior
dismissed bankruptcy petitions, see 11 U.S.C. § 362(c)(4)(A),
the court granted Howard’s motion to impose a stay when it
confirmed his plan on October 16. The City did not object to
its treatment as unsecured under the plan and did not appeal
the confirmation order; rather, it simply refused to release
Howard’s vehicle unless he paid 100% of its claim.
On January 22, 2018, the court issued a rule to show cause
to the City why it should not be sanctioned for refusing to re‐
lease Howard’s vehicle in accordance with Thompson. The
court rejected the City’s argument that it was excepted from
the stay under § 362(b)(3) and, on April 16, 2018, ordered
sanctions of $50 per day beginning August 22, 2017 for the
City’s violation of the stay.
8 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

After the City filed its opening appellate brief, Howard
filed notice of his intention not to participate in the appeal.
His counsel explained Howard’s bankruptcy case had been
dismissed and the City disposed of his vehicle. He has since
filed a new bankruptcy case to address his parking tickets but
has abandoned interest in the vehicle that was the subject of
the relevant Chapter 13 petition in the bankruptcy court be‐
low. However, “issues related to an alleged violation of the
automatic stay” are not mooted by dismissal of a bankruptcy
petition, Denby‐Peterson v. Nu2u Auto World, 595 B.R. 184, 188
(D.N.J. 2018); a court “must have the power to compensate
victims of violations of the automatic stay and punish the vi‐
olators, even after the conclusion of the underlying bank‐
ruptcy case.” In re Johnson, 575 F.3d 1079, 1083 (10th Cir. 2009)
(citing In re Davis, 177 B.R. 907, 911–12 (B.A.P. 9th Cir. 1995)).
* * *
In each of these four cases, the City appealed the bank‐
ruptcy courts’ orders finding the City violated the stay. These
cases have been consolidated for appeal.
II. Discussion
The main question before us is whether the City is obli‐
gated to return a debtor’s vehicle upon her filing of a Chapter
13 bankruptcy petition, or whether the City is entitled to hold
the debtor’s vehicle until she pays the fines and costs or until
she obtains a court order requiring the City to turn over the
vehicle. We review a bankruptcy court’s factual findings for
clear error and conclusions of law de novo. In re Jepson, 816
F.3d 942, 945 (7th Cir. 2016).
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 9

A. The Automatic Stay
Section 362(a)(3) of the Bankruptcy Code provides that a
Chapter 13 bankruptcy petition “operates as a stay, applicable
to all entities, of … 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) (emphasis
added). We applied this provision to a very similar factual sit‐
uation in Thompson v. General Motors Acceptance Corp. There, a
creditor seized a debtor’s car after he defaulted on payments.
566 F.3d at 700. The debtor filed a Chapter 13 petition and at‐
tempted to retrieve his car, but the creditor refused. Id. We
considered two issues relating to § 362(a)(3): whether the
creditor “exercised control” of property of the bankruptcy es‐
tate by failing to return the vehicle after the debtor filed for
bankruptcy, and whether the creditor was required to return
the vehicle prior to a court determination establishing the
debtor could provide adequate protection for the creditor’s
interest in the vehicle. Id. at 701.
1. “Exercise Control”
First, we observed in Thompson there was no debate the
debtor has an equitable interest in his vehicle, and “as such, it
is property of his bankruptcy estate.” 566 F.3d at 701 (citing
United States v. Whiting Pools, Inc., 462 U.S. 198, 203 (1983)); see
5 Collier on Bankruptcy ¶ 541.01 (16th ed. 2019) (“Congress’s
intent to define property of the estate in the broadest possible
sense is evident from the language of the statute which, in sec‐
tion 541(a)(1), initially defines the scope of estate property to
be all legal or equitable interests of the debtor in property as
of the commencement of the case, wherever located and by
whomever held.”). We then rejected the creditor’s argument
10 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

that passively holding the asset did not satisfy the Code’s def‐
inition of exercising control: “Holding onto an asset, refusing
to return it, and otherwise prohibiting a debtor’s beneficial
use of an asset all fit within th[e] definition, as well as within
the commonsense meaning of the word.” Thompson, 566 F.3d
at 702. As we explained, limiting the reach of “exercising con‐
trol” to “selling or otherwise destroying the asset,” as the
creditor proposed, did not fit with bankruptcy’s purpose:
“The primary goal of reorganization bankruptcy is to group
all of the debtor’s property together in his estate such that he
may rehabilitate his credit and pay off his debts; this neces‐
sarily extends to all property, even property lawfully seized
pre‐petition.” Id. (citing Whiting Pools, 462 U.S. at 203–04).
Additionally, Congress amended § 362(a)(3) in 1984 to
prohibit conduct that “exercise[d] control” over estate assets.
We determined this addition suggested congressional intent
to make the stay more inclusive by including conduct of
“creditors who seized an asset pre‐petition.” Id.; see In re
Javens, 107 F.3d 359, 368 (6th Cir. 1997) (“The fact that ‘to ob‐
tain possession’ was amended to ‘to obtain possession … or
to exercise control’ hints [] that this kind of ‘control’ might be
a broadening of the concept of possession … It could also
have been intended to make clear that [§ 362](a)(3) applied to
property of the estate that was not in the possession of the
debtor.” (first alteration in original)); In re Del Mission Ltd., 98
F.3d 1147, 1151 (9th Cir. 1996) (The 1984 amendment
“broaden[ed] the scope of § 362(a)(3) to proscribe the mere
knowing retention of estate property.”). We therefore held
that in retaining possession of the car, the creditor violated the
automatic stay in § 362(a)(3). Thompson, 566 F.3d at 703.
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 11

2. Compulsory Turnover
Next, we concluded § 362(a)(3) becomes effective immedi‐
ately upon filing the petition and is not dependent on the
debtor first bringing a turnover action. Id. at 707–08. In so con‐
cluding, we relied on a plain reading of §§ 363(e) and 542(a)
and the Supreme Court’s decision in Whiting Pools.
Section 363(e) provides:
[O]n request of an entity that has an interest in
property used, sold, or leased, or proposed to be
used, sold, or leased … by the trustee, the court,
with or without a hearing, shall prohibit or con‐
dition such use, sale, or lease as is necessary to
provide adequate protection of such interest.
11 U.S.C. § 363(e). The creditor acknowledged, and we
agreed, that it has the burden of requesting protection of its
interest in the asset under § 363(e). “However, if a creditor is
allowed to retain possession, then this burden is rendered
meaningless—a creditor has no incentive to seek protection of
an asset of which it already has possession.” Thompson, 566
F.3d at 704. For § 363(e) to have meaning then, the asset must
be returned to the estate prior to the creditor seeking protec‐
tion of its interest. Id.; cf. In re Sharon, 234 B.R. 676, 684 (B.A.P.
6th Cir. 1999) (“[T]he Bankruptcy Code does not elevate [the
creditor’s] adequate protection right above the Chapter 13
debtor’s right to possession and use of a car.”).
Moreover, § 542(a) “indicates that turnover of a seized as‐
set is compulsory.” Thompson, 566 F.3d at 704. Section 542(a)
requires that a creditor in possession of property of the estate
“shall deliver to the trustee, and account for, such property or
12 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

the value of such property, unless such property is of incon‐
sequential value or benefit to the estate.” 11 U.S.C. § 542(a)
(emphasis added). We observed that a majority of courts had
found § 542(a) worked in conjunction with § 362(a) “to draw
back into the estate a right of possession that is claimed by a
lien creditor pursuant to a pre‐petition seizure; the Code then
substitutes ‘adequate protection’ for possession as one of the
lien creditor’s rights in the bankruptcy case.” Thompson, 566
F.3d at 704 (quoting Sharon, 234 B.R. at 683). Because “[t]he
right of possession is incident to the automatic stay,” id., the
creditor must first return the asset to the bankruptcy estate.
Only then is “the bankruptcy court [] empowered to condition
the right of the estate to keep possession of the asset on the
provision of certain specified adequate protections to the
creditor.” Id.; see also 11 U.S.C. § 362(d)(1) (“On request of a
party in interest and after notice and a hearing, the court shall
grant relief from the stay provided under [§ 362](a) … for
cause, including the lack of adequate protection of an interest
in property ….”). The Supreme Court indicated as much in
Whiting Pools when it explained that a “creditor with a se‐
cured interest in property included in the estate must look to
[§ 363(e)] for protection, rather than to the nonbankruptcy remedy
of possession.” 462 U.S. at 204 (emphasis added).
3. Thompson Controls
Applying Thompson to the facts before us, we conclude, as
each bankruptcy court did, that the City violated the auto‐
matic stay pursuant to § 362(a)(3) by retaining possession of
the debtors’ vehicles after they declared bankruptcy. See In re
Shannon, 18‐bk‐04116, Mem. Op. at 11 (Bankr. N.D. Ill. Sept. 7,
2018), ECF No. 64 (“Thompson [] requires any secured creditor
in possession of a debtor’s vehicle to return it immediately
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 13

and seek adequate protection ….”); In re Peake, 18‐bk‐16544,
Mem. Op. at 3 (Bankr. N.D. Ill. Aug. 15, 2018), ECF No. 40
(“[T]he City’s conduct in retaining possession of the vehicle
violates [§] 362(a)(3) as that section has been interpreted … in
Thompson ….”); In re Fulton, 18‐bk‐02860, Mem. Op. at 2
(Bankr. N.D. Ill. May 25, 2018), ECF No. 39 (“[T]he City is cir‐
cumventing entirely the procedural burden imposed on it by
Thompson and the protections provided to debtors by the au‐
tomatic stay.”); In re Howard, 17‐bk‐25141, Mem. Op. at 10
(Bankr. N.D. Ill. Apr. 16, 2018), ECF. No. 63 (“[Section 362(a)]
does not authorize continued possession of impounded vehi‐
cles in contravention of the Thompson ruling.”). The City was
required to return debtors’ vehicles and seek protection
within the framework of the Bankruptcy Code rather than
through “the nonbankruptcy remedy of possession.” Whiting
Pools, 462 U.S. at 204.
The City acknowledges Thompson controls but asks us to
overrule Thompson for three reasons: (1) property impounded
prior to bankruptcy is not property of the bankruptcy estate
because the debtors did not have a possessory interest in their
vehicles at the time of filing; (2) the stay requires creditors to
maintain the status quo and not take any action, such as re‐
turning property to the debtor, so the onus is on the debtor to
move for a turnover action to retrieve her vehicle; and (3) the
plain language of § 362(a)(3) requires an “act” to exercise con‐
trol, and passive retention of the vehicle is not an “act.”
We decline the City’s request; Thompson considered and
rejected these arguments. More fundamentally, the City’s ar‐
guments ignore the purpose of bankruptcy—“to allow the
debtor to regain his financial foothold and repay his credi‐
14 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

tors.” Thompson, 566 F.3d at 706; see also 5 Collier on Bank‐
ruptcy ¶ 541.01 (“[The] central aggregation and protection of
property [] promote[s] the fundamental purposes of the Bank‐
ruptcy Code: the breathing room given to a debtor that at‐
tempts to make a fresh start, and the equality of distribution
of assets among similarly situated creditors according to the
priorities set forth within the Code.”). To effectively do so, a
debtor must be able to use his assets “while the court works
with both debtor and creditors to establish a rehabilitation
and repayment plan.” Thompson, 566 F.3d at 707; see also Whit‐
ing Pools, 462 U.S. at 203 (“[T]o facilitate the rehabilitation of
the debtor’s business, all the debtor’s property must be in‐
cluded in the reorganization estate.”). This is why § 542 com‐
pels the return of property to the estate, including “property
in which the debtor did not have a possessory interest at the
time the bankruptcy proceedings commenced.” Whiting Pools,
462 U.S. at 205; see In re Weber, 719 F.3d 72, 79 (2d Cir. 2013)
(“Whiting Pools teaches that the filing of a petition will gener‐
ally transform a debtor’s equitable interest into a bankruptcy
estate’s possessory right in the vehicle.”). Thus, contrary to
the City’s argument, the status quo in bankruptcy is the return
of the debtor’s property to the estate. In refusing to return the
vehicles to their respective estates, the City was not passively
abiding by the bankruptcy rules but actively resisting § 542(a)
to exercise control over debtors’ vehicles.
What’s more, the position we took in Thompson brought
our Circuit in line with the majority rule, held by the Second,
Eighth, and Ninth Circuits. See Weber, 719 F.3d 72; Del Mission
98 F.3d 1147; In re Knaus, 889 F.2d 773 (8th Cir. 1989). Alt‐
hough the Tenth Circuit recently adopted the City’s view, see
In re Cowen, 849 F.3d 943 (10th Cir. 2017), that position is still
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 15

the minority rule. Our reasoning in Thompson continues to re‐
flect the majority position and we believe it is the appropriate
reading of the bankruptcy statutes. At bottom, the City wants
to maintain possession of the vehicles not because it wants the
vehicles but to put pressure on the debtors to pay their tickets.
That is precisely what the stay is intended to prevent.1
The City, though, pleads necessity; it claims that, without
retaining possession, it is helpless to prevent the loss or de‐
struction of the vehicles. It did not attempt in any of these
cases, however, to seek adequate protection of its interests
through the methods available under the Bankruptcy Code,
and at oral argument, the City asserted it did not have “the
opportunity” to request such protection before the bank‐
ruptcy courts ordered it to return the vehicles. The record be‐
lies this statement. In each case, the parties engaged in motion
practice, often over the course of months, before the courts
held the City to be in violation of the stay. At any point the
City could have sought adequate protection of its interests,
but it chose not to avail itself of the Code’s available proce‐
dures. See, e.g., 11 U.S.C. § 362(d)(1) (court may relieve credi‐
tor from the stay if debtor cannot adequately protect credi‐
tor’s interest in the property); id. § 362(f) (court may relieve
creditor from stay “as is necessary to prevent irreparable
damage to the interest of an entity in property”); id. § 363(e)
(creditor may request court to place limits or conditions on

1 The In re Shannon court further found that § 362(a)(4) and (a)(6) also
prohibit the City’s continued retention of debtors’ vehicles. Because the
City is bound by the stay under § 362(a)(3), we do not reach the applica‐
bility of the additional stay provisions.
16 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

trustee’s power to use, sell, or lease property to protect credi‐
tor’s interest).
We recognize that once the City complies with the auto‐
matic stay and immediately turns over vehicles, it will need
to seek protection on an expedited basis. Though we leave it
to the City and the bankruptcy courts to fashion the precise
procedure for doing so, we note the following: The City will
have notice of the bankruptcy petition when the debtor re‐
quests her vehicle, if not sooner. At that time, the City may
immediately file an emergency motion for adequate protec‐
tion of its interest in a debtor’s vehicle, which may be heard
within a day or so, and the City can even file such motions ex
parte if necessary. See id. § 363(e); Fed. R. Bankr. P. 4001(a)(2);
see also 11 U.S.C. § 362(d)(1), (f); Bankr. N.D. Ill. R. 9013‐
9(B)(9)(d) (motion for relief from stay under § 362 where mo‐
vant alleges security interest in vehicle “ordinarily [] granted
without hearing”). It will be the rare occasion where a single
day’s delay will have lost the City the value of its security.
Regardless, the Code is clear that it is the creditor’s obligation
to come to court and ask for protection, not, as the City advo‐
cates, the debtor’s obligation to file an adversary proceeding
against every creditor holding her property at the time she
files for bankruptcy. Cf. In re Lisse, 921 F.3d 629, 639 (7th Cir.
2019) (“The basic premise [of Chapter 13] is to facilitate the
debtor’s ability to pay his creditors ….”).
The City’s argument that it will be overburdened with re‐
sponding 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. It perhaps also reflects the im‐
portance of vehicles to residents’ everyday lives, particularly
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 17

where residents need their vehicles to commute to work and
earn an income in order to eventually pay off their fines and
other debts.2 It is not a reason to permit the City to ignore the
automatic stay and hold captive property of the estate, in con‐
travention of the Bankruptcy Code.
Furthermore, if a debtor files a bankruptcy petition in bad
faith and immediately dismisses her case, as the City claims
many debtors do solely to retrieve their impounded vehicles,
the City has recourse: it may file a bad faith motion against
the debtor. If the court finds bad faith, it may immediately

2 We additionally note that the “flood” of Chapter 13 filings is evi‐
dence of the disproportionate effect of the City’s traffic fines and fees on
its low‐income residents, an issue that is not unique to Chicago. See, e.g.,
Maura Ewing, Should States Charge Low‐Income Residents Less for Traffic
Tickets?, The Atlantic (May 13, 2017), https://www.theatlantic.com/poli‐
tics/archive/2017/05/traffic‐debt‐california‐brown/526491/ (California);
Sam Sanders, Study Finds The Poor Subject To Unfair Fines, Driverʹs License
Suspensions, NPR: The Two‐Way (Apr. 9, 2015), https://www.npr.org/sec‐
tions/thetwo‐way/2015/04/09/398576196/study‐find‐the‐poor‐subject‐to‐
unfair‐fines‐drivers‐license‐suspensions (Missouri and California);
Melissa Sanchez & Sandhya Kambhampati, How Chicago Ticket Debt Sends
Black Motorists Into Bankruptcy, ProPublica Illinois (Feb. 27, 2018),
https://features.propublica.org/driven‐into‐debt/chicago‐ticket‐debt‐
bankruptcy/ (“[African‐American] neighborhoods account for 40 percent
of all debt, though they account for only 22 percent of all the tickets issued
in the city over the past decade—suggesting how the debt burdens the
poor.”); see also Torie Atkinson, Note, A Fine Scheme: How Municipal Fines
Become Crushing Debt in the Shadow of the New Debtorsʹ Prisons, 51 Harv.
C.R.‐C.L. L. Rev. 189, 217–22 (2016) (“The consequences of fines and fees
can be dramatic and unforgiving: unemployment, loss of transportation,
homelessness, loss of government or community services, and poor credit.
And without the ability to accumulate wealth or capture even the smallest
windfall for themselves, the poor become poorer, unable to climb out of
an economic chasm.”).
18 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

dismiss the case and may even sanction the debtor. 11 U.S.C.
§ 1307(c); see, e.g., Lisse, 921 F.3d at 639–41 (affirming sanctions
and dismissal of Chapter 13 petition filed in bad faith to col‐
laterally attack state court judgment); In re Bell, 125 F. App’x
54, 57 (7th Cir. 2005) (affirming dismissal of Chapter 13 peti‐
tion with prejudice where debtors filed multiple petitions
“solely to impede the foreclosure sale” of their home).
B. Exceptions to the Stay
The City next argues that even if the stay applies, it is ex‐
cepted under § 362(b)(3) and (b)(4). “We construe the Bank‐
ruptcy Code ‘liberally in favor of the debtor and strictly
against the creditor.’” Village of San Jose v. McWilliams, 284
F.3d 785, 790 (7th Cir. 2002) (quoting In re Brown, 108 F.3d
1290, 1292 (10th Cir. 1997)). The automatic stay is “one of the
fundamental debtor protections provided by the bankruptcy
laws.” Midlantic Nat’l Bank v. N.J. Dep’t of Envtl. Prot., 474 U.S.
494, 503 (1986) (quoting S. Rep. No. 95–989, at 54 (1978), re‐
printed in 1978 U.S.C.C.A.N. 5787, 5840). We therefore nar‐
rowly construe exceptions “to give the automatic stay its in‐
tended broad application.” In re Grede Foundries, Inc., 651 F.3d
786, 790 (7th Cir. 2011); see In re Stringer, 847 F.2d 549, 552 (9th
Cir. 1988) (“Congress clearly intended the automatic stay to
be quite broad. Exemptions to the stay, on the other hand,
should be read narrowly to secure the broad grant of relief to
the debtor.” (footnotes omitted)).
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 19

1. Section 362(b)(3)
Section 362(b)(3) provides that a Chapter 13 bankruptcy
petition does not operate as a § 362(a) automatic stay:
of any act to perfect, or to maintain or con‐
tinue the perfection of, an interest in prop‐
erty to the extent that the trustee’s rights and
powers are subject to such perfection under
section 546(b) of [the Bankruptcy Code] or to
the extent that such act is accomplished
within the period provided under section
547(e)(2)(A) of [the Bankruptcy Code].
11 U.S.C. § 362(b)(3). Section 546(b) limits a trustee’s power to
avoid a nonperfected lien by making that power subject to
any nonbankruptcy law that “permits perfection of an interest
in property to be effective against an entity that acquires
rights in such property before the date of perfection,” or “pro‐
vides for the maintenance or continuation of perfection of an
interest in property to be effective against an entity that ac‐
quires rights in such property before the date on which action
is taken to effect such maintenance or continuation.” 11 U.S.C.
§ 546(b)(1). The classic example of this exception is for a cred‐
itor who has a grace period for perfecting its interest, such as
under the Uniform Commercial Code. See 3 Collier on Bank‐
ruptcy ¶ 362.05 (explaining § 362(b)(3) permits a purchase‐
money secured creditor to retroactively perfect under the
twenty‐day grace period provided in Article 9 of the U.C.C.
and permits the filing of continuations of financing state‐
ments under U.C.C. § 9‐515).
As the In re Shannon court explained, through §§ 362(b)(3)
and 546(b), “Congress sought only to prevent a trustee from
20 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

avoiding the lien of a creditor when only the intervening
bankruptcy stopped the creditor from perfecting or continu‐
ing perfection of its lien.” Thus, the purpose of these sections
is to prevent creditors from losing their lien rights because of
the bankruptcy; they do not permit creditors to retain posses‐
sion of debtors’ property. Indeed, if the nonbankruptcy law
requires a creditor to seize property after the filing of a bank‐
ruptcy petition to perfect or maintain the perfection of a lien,
§ 546(b)(2) replaces the seizure requirement with the giving
of notice. See 3 Collier on Bankruptcy ¶ 362.05. “This assures
that the trustee’s right to maintain possession of the property
will be unaffected by the creditor’s right to perfect its inter‐
est.” Id. And the (b)(3) exception permits a creditor to give no‐
tice under § 546(b)(2) without violating the automatic stay.
Here, the City argues the Chicago Municipal Code (a non‐
bankruptcy law) gives it the right to retain possession of a
debtor’s vehicle until the debt is paid, thereby creating a pos‐
sessory lien on the vehicle. See, e.g., M.C.C. §§ 9‐92‐080(f), 9‐
100‐120(b)–(c). It further asserts it must retain the vehicle to
maintain perfection of its lien.
First, as to perfection, it is commonly understood that an
interest in property is perfected when it is valid against other
creditors who have an interest in the same property. See Per‐
fection, Black’s Law Dictionary (11th ed. 2019). The City’s con‐
tinued possession of a debtor’s vehicle is one way to perfect
its lien because it can demand the amount owed to it from any
holder of an interest in the vehicle before it gives up posses‐
sion, be that the debtor or another lienholder asserting its
right to possession of the vehicle. See M.C.C. § 9‐92‐080(a), (c).
However, possession is not the only way to perfect; the City
can also perfect its lien by filing notice of its interest in the
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 21

vehicle, such as with the Secretary of State or the Recorder of
Deeds. And the Chapter 13 plan, itself, provides a public rec‐
ord of secured liens. See 11 U.S.C. § 1325(a)(5) (regarding the
rights of secured creditors related to confirmation of the plan).
Thus, the City does not need to retain possession of the vehi‐
cle to maintain perfection of its lien.
Second, despite its arguments to the contrary, the City’s
possessory lien is not destroyed by its involuntary loss of pos‐
session due to forced compliance with the Bankruptcy Code’s
automatic stay. The City did not indicate any intent to aban‐
don or release its lien, so its possessory lien survives its loss
of possession to the bankruptcy estate. See In re Estate of Miller,
556 N.E.2d 568, 572 (Ill. App. Ct. 1990) (“The law respecting
common law retaining liens is that the involuntary relinquish‐
ment of retained property pursuant to a court order does not
result in the loss of the lien.”); see also In re Borden, 361 B.R.
489, 495 (B.A.P. 8th Cir. 2007) (“[I]nvoluntary loss of posses‐
sion does not defeat the [] lien.”); Restatement (First) of Secu‐
rity § 80 cmt. c (1941) (“The lien is a legal interest dependent
upon possession. Where the lienor voluntarily gives up the
possession, his lien, at least so far as it is a legal interest, is
gone. The lienor … does not lose his legal interest if he is de‐
prived without his consent of his possession.”).3

3 The City’s attempt to distinguish between loss of possession due to
compliance with a court order versus compliance with the automatic stay
is in vain. Section 362 provides for the imposition of punitive damages for
willful violations of the automatic stay. See 11 U.S.C. § 362(k)(1). This
demonstrates that failure to comply with the stay may be punished even
more severely than failure to comply with a court order and, correspond‐
ingly, there is no question the stay compels the City to return the vehicles.
22 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

Because the City does not lose its perfected lien via the in‐
voluntary loss of possession of the debtors’ vehicles to the
bankruptcy estates, § 362(b)(3) does not apply to except it
from the stay. To the extent the City has any doubt about the
continuation of its lien, when it requests relief from the auto‐
matic stay and adequate protection, it could also ask the bank‐
ruptcy court to include in its order a notation of the City’s
continuing lien on the property.
2. Section 362(b)(4)
Alternatively, the City looks to § 362(b)(4) to except it from
the stay. That section provides that a Chapter 13 bankruptcy
petition does not operate as a § 362(a) automatic stay:
of the commencement or continuation of an
action or proceeding by a governmental
unit … to enforce such governmental unit’s
or organization’s police and regulatory
power, including the enforcement of a judg‐
ment other than a money judgment, ob‐
tained in an action or proceeding by the gov‐
ernmental unit to enforce such governmen‐
tal unit’s … police or regulatory power.
11 U.S.C. § 362(b)(4). “This exception has been narrowly con‐
strued to apply to the enforcement of state laws affecting
health, welfare, morals and safety, but not to ‘regulatory laws
that directly conflict with the control of the res or property by
the bankruptcy court.’” In re Cash Currency Exch., Inc., 762 F.2d
542, 555 (7th Cir. 1985) (quoting In re Missouri, 647 F.2d 768,
776 (8th Cir. 1981)). The City asserts its impoundment of ve‐
hicles is an exercise of its police power to enforce traffic regu‐
lations as a matter of public safety. The debtors respond that
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 23

the impoundment of vehicles enhances the City’s revenue col‐
lection rather than protects public safety, and it is therefore an
enforcement of a money judgment which § 362(b)(4) does not
permit.
Courts apply two tests to determine whether a state’s ac‐
tions fall within the scope of § 362(b)(4)—the pecuniary pur‐
pose test and the public policy test. Chao v. Hosp. Staffing
Servs., Inc., 270 F.3d 374, 385–86 (6th Cir. 2001); In re First All.
Mortg. Co., 263 B.R. 99, 107–08 (B.A.P. 9th Cir. 2001). Satisfying
either test is sufficient for the exception to apply. See First All.
Mortg., 263 B.R. at 108; see also 3 Collier on Bankruptcy
¶ 362.05.
The pecuniary purpose test requires the court to “look to
what specific acts the government wishes to carry out and de‐
termine if such execution would result in an economic ad‐
vantage over third parties in relation to the debtor’s estate.”
Solis v. Caro, No. 11‐cv‐6884, 2012 WL 1230824, at *5 (N.D. Ill.
Apr. 12, 2012) (quoting In re Emerald Casino, Inc., No. 03‐cv‐
05457, 2003 WL 23147946, at *8 (N.D. Ill. Dec. 24, 2003)). “[I]f
the focus of the police power is directed at the debtor’s finan‐
cial obligations rather than the [government’s] health and
safety concerns, the automatic stay is applicable.” In re Ellis,
66 B.R. 821, 825 (N.D. Ill. 1986) (quoting In re Sampson, 17 B.R.
528, 530 (Bankr. D. Conn. 1982)). Though the City says its im‐
poundment laws are “designed to further the safety and wel‐
fare of Chicago residents” with just an “ancillary pecuniary
benefit,” we disagree. In retaining possession of the vehicles
until it is paid in full, the City is “attempting to satisfy a debt
outside the bankruptcy process,” which would give it an ad‐
vantage over other parties interested in the debtors’ estates.
24 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

Emerald Casino, 2003 WL 23147946, at *9. The City’s act is fo‐
cused on the debtor’s financial obligation, not its safety con‐
cerns, and thus fails the pecuniary purpose test.
Alternatively, the public policy test considers whether the
state action is principally to effectuate public policy or to ad‐
judicate private rights. Hosp. Staffing Servs., 270 F.3d at 385–
86; Caro, 2012 WL 1230824, at *4. The public policy the City
highlights is enforcing its traffic ordinances against repeat of‐
fenders “for the safety and convenience of the public.” It ex‐
plains the traffic ordinance system gradually escalates, begin‐
ning with the issuance of fines then intensifying to immobili‐
zation and impoundment only after an individual ignores re‐
peat citations. Without impoundment as a general deterrence,
the City argues, it cannot enforce its traffic regulations. See
Emerald Casino, 2003 WL 23147946, at *6.
The debtors argue the balance between revenue collection
and public safety weighs heavily toward the former. Addi‐
tionally, prior to the 2016 Municipal Code amendment impos‐
ing a possessory lien on impounded vehicles, the City re‐
leased impounded vehicles to Chapter 13 debtors. When the
City recently amended the Code, it did not mention public
safety concerns but rather stated the amendment was “in re‐
sponse to a growing practice of individuals attempting to es‐
cape financial liability for their immobilized or impounded
vehicles.” Chi., Ill., Ordinance, Amendment of M.C.C. § 9‐
100‐120 (July 6, 2017).
We are persuaded that, on balance, this is an exercise of
revenue collection more so than police power. As debtors ob‐
serve, a not insignificant portion of the City’s annual operat‐
ing fund comes from its collection of parking and traffic tick‐
ets. See City of Chicago, 2019 Budget Overview 29, 192 (2018),
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 25

https://chicago.legistar.com/View.ashx?M=F&ID=6683992&
GUID=CAEFBC7F‐7C1A‐4B2E‐9F8B‐0CB931B3EE88 (fines,
forfeitures, and penalties—primarily from parking tickets—
constitute approximately nine percent of the 2019 fund).
Moreover, the kind of violations the City enforces are not tra‐
ditional police power regulations; these fines are for parking
tickets, failure to display a City tax sticker, and minor moving
violations. Even tickets for a suspended license, a seemingly
more serious offense, are often the result of unpaid parking
tickets and are thus not related to public safety. And the City
impounds vehicles regardless of what violations the owner
has accrued, without distinguishing between more serious vi‐
olations that could affect public safety versus the mere failure
to pay for parking. Most notably, the City imposes the mone‐
tary penalty on the owner of the vehicle, not the driver, which
signals a seeming disconnect if the City actually has safety
concerns about the offending driver. As the ordinance
amending M.C.C. § 9‐100‐120 demonstrates, the City’s focus
is on the financial liability of vehicle owners, not on public
safety.
But even if we assume that the adjudication of these viola‐
tions is the result of the City’s exercise of police and regula‐
tory power, the City cannot enforce these final determinations
of liability if they are “money judgment[s]” as the term is used
in § 362(b)(4). See S. Rep. No. 95‐989, at 52 (1978), reprinted in
1978 U.S.C.C.A.N. 5787, 5838 (“Since the assets of the debtor
are in the possession and control of the bankruptcy court, and
… constitute a fund out of which all creditors are entitled to
share, enforcement by a governmental unit of a money judg‐
ment would give it preferential treatment to the detriment of
all other creditors.”). A judgment is a “money judgment” that
cannot be enforced without violating the automatic stay if it
26 Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023

requires payment. 3 Collier on Bankruptcy ¶ 362.05 (“[T]he
governmental unit still may commence or continue any police
or regulatory action, including one seeking a money judg‐
ment, but it may enforce only those judgments and orders that do
not require payment.” (emphasis added)); First All. Mortg., 263
B.R. at 107 (same); see also 3 Collier on Bankruptcy ¶ 362.05
(“Although a governmental unit may obtain a liability deter‐
mination, it may not collect on any monetary judgment re‐
ceived.” (emphasis added)); SEC v. Brennan, 230 F.3d 65, 71
(2d. Cir. 2000) (“[Section] 362(b)(4) permits the entry of a
money judgment against a debtor … [but] anything beyond the
mere entry of a money judgment against a debtor is prohibited
by the automatic stay.”).
The City claims it did not have money judgments “be‐
cause it did not pursue the additional steps required to turn
the citations into money judgments in the circuit court.” We
disagree. A “money judgment” is simply an order that iden‐
tifies “the parties for and against whom judgment is being en‐
tered” and “a definite and certain designation of the amount …
owed.” Penn Terra Ltd. v. Dep’t of Envtl. Res., 733 F.2d 267, 275
(3d Cir. 1984). Prior to impounding a vehicle, the City must
administratively adjudicate the debtor’s violations, see M.C.C.
§ 9‐100‐010, and those adjudications result in a determination
of final liability—i.e., a judgment. Only after a debtor has two
or three judgments against it does the Municipal Code au‐
thorize the City to impound the vehicle until the debtor pays
the judgments and related costs and fees. See id. §§ 2‐14‐
132(c)(1)(A), 9‐92‐080, 9‐100‐120(b). So, without any addi‐
tional steps, the City had final determinations of liability re‐
quiring these particular debtors to pay it specific sums.
Nos. 18‐2527, 18‐2793, 18‐2835, & 18‐3023 27

The City does not contest that it conditioned the release of
the debtors’ vehicles on payment of the amount specified in
the final determinations of liability. Cf. id. § 9‐100‐100(b)
(“Any fine and penalty … remaining unpaid after the notice
of final determination of liability is sent shall constitute a debt
due and owing the city ….”). The continued possession of the
vehicles is the City’s attempt to short‐circuit the state court
collection process and to enforce final judgments requiring
monetary payment from the debtors. As such, the City is not
excepted from the stay under § 362(b)(4). That the City is not
excepted under § 362(b)(4) does not “permit[] debtors to park
for free wherever they like, or to drive without a risk of fines
for moving violations ….” In re Steenes, 918 F.3d 554, 558 (7th
Cir. 2019). This just means the City needs to satisfy the debts
owed to it through the bankruptcy process, as do all other
creditors.
III. Conclusion
For the foregoing reasons, we AFFIRM the judgments of the
bankruptcy courts.