Here in Chicago, many people rely on their vehicles to get to work, pick up their kids from school, attend critical appointments, and so much more. Particularly for individuals who are in debt, having reliable access to transportation can often mean the difference between keeping a job, making payments to creditors, and getting the help they need or having to face all the pressure of mounting debt without any sort of reliable safety net.

In Chicago, a recent federal appeals court ruling could be a dramatic first step in helping debtors regain access to their impounded vehicles via Chapter 13 bankruptcy. 

This news comes to us from the ABA Journal and ProPublica Illinois, which recently reported on this long-in-the-works legal battle that has culminated in a decision from the 7th U.S. Circuit Court of Appeals.

To keep it simple? As ProPublica writer Melissa Sanchez notes, “debt from unpaid parking and automated traffic camera tickets has led thousands” of drivers to file for Chapter 13 bankruptcy, which can allow for ticket debt forgiveness and an automatic stay, providing debtors with “the opportunity to regain their financial footing and repay their creditors.” 

As we have discussed before, Chapter 13 bankruptcy allows debtors to hold onto their assets, while creating a repayment plan to restructure their debts and make payments to their creditors over a number of years. For many drivers, it is often going to be easier and less expensive upfront to file for bankruptcy than to pay to enroll in a city ticket payment plan to get their impounded vehicles back. 

As a result, the city attempted to find a way to “stem the flood of bankruptcies and bring in more revenue,” as Sanchez reports. She continues: 

“…city officials in 2017 began claiming that the city had liens on impounded vehicles and that it didn’t have to return them immediately after motorists filed for bankruptcy. Instead, the city held onto the cars until motorists agreed to prioritize paying off ticket debt in their bankruptcy payment plan, a process that often took months…This assured the city it would get paid back more of what it was owed; typically, debtors pay just pennies on the dollar for unpaid tickets in bankruptcy payment plans, which can last up to five years.”

Ultimately, the federal appeals court determined that while the city’s claims to have liens on the vehicles may be valid, “it still needed to return the vehicles to their owners immediately after they filed for bankruptcy,” Sanchez writes.

As the panel of judges wrote in its decision

“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 [automatic] stay is intended to prevent… 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… It perhaps also reflects the importance of vehicles to residents’ everyday lives, particularly where residents need their vehicles to commute to work and earn an income in order to eventually pay off their fines and other debts.”

As Sanchez continues: 

“The court also rejected the city’s argument that it needed to hold onto impounded vehicles to keep bad drivers off the road. The judges wrote that the kind of violations that typically lead to impoundments 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.’”

In the short term, this ruling indicates that debtors who file for Chapter 13 should be able to get their vehicles out of impoundment more quickly. In addition, rather than having a blanket policy intended to deter Chapter 13 filings, the city is in a position instead where it must treat matters on a case-by-case basis, going to court if it believes the bankruptcy to be in bad faith, for example. 

As Eugene Wedogg, the retired bankruptcy judge for the Northern District of Illinois who argued the appeal for debtors, put it: “This allows Chapter 13 to accomplish its intended purpose, which is to put the property that a debtor needs to go on with the debtor’s life in the hands of the debtor.” 

Moving forward, it is unclear whether the city’s new mayoral administration will fight the ruling and ask the Supreme Court to take the case. 

Have Any More Questions About Chapter 13 Bankruptcy In Chicago?

When it comes to getting you the debt relief you deserve, there are any number of crucial factors that need to be taken into account – from your income, to your allowable expenses, to the amount of secured vs. unsecured debts you have.

Bottom line? It’s a lot to tackle alone – but the attorneys and staff of the Gunderson Law Firm would be happy to help.

If you have any questions or are looking for guidance about any aspect of Chapter 7 or Chapter 13 bankruptcy in Chicago, the Gunderson Law Firm can help can get you actual, straightforward answers for your unique situation – no need to search for all the variables and hope you don’t miss any key detail.

At the Gunderson Law Firm, our experienced bankruptcy team will take all steps possible to protect you and your assets immediately, and throughout the bankruptcy process.

Down the line, we can also counsel you on realistic ways to avoid such serious debt issues in the future. Whether you are a business owner, a wage earner, retired, or otherwise, we can address your specific situation with strategic plans to help put severe indebtedness behind you so you can enjoy life again. Don’t hesitate to drop us a line with any questions, or to set up your free initial consultation.