A recent ruling by Judge Cassling in Chicago, clarifies provisions of the automatic stay in regards to returns of vehicles that were taken pre-bankruptcy filing.
Bankruptcy Caption: In re Bianca L. Avila
Bankruptcy No: 17 B 00870
In this case, the city of Chicago seized the debtor's vehicle prior to her filing a chapter 13 bankruptcy case. She sought to have the court order the creditor to return the vehicle because of her chapter 13 bankruptcy case.
Judge Cassling ruled that the exception to the automatic stay carved out by 11 U.S.C. § 362(b)(3), which reads “does not operate as a stay—under subsection (a) of this section, of any act to perfect, or to maintain or continue the perfection of, an interest in property to the extent that the trustee’s rights and powers are subject to such perfection under section 546(b) of this title….”
Therefore, since the city has a possessory lien on the vehicle which was perfected when they seized the vehicle, they are allowed to retain that lien and not be in violation of the automatic stay.
This differs from case law that requires a secured creditor, such as a car finance company, since their lien was not statutory, merely consensual (thru contract recorded against the title) to give back a vehicle upon filing of the chapter 13 bankruptcy.
