City of Chicago v. Fulton
The Facts
Chicago impounded vehicles for unpaid parking tickets and fines. After the owners filed for bankruptcy, the automatic stay took effect. Chicago refused to return the vehicles unless the owners paid their fines, a practice challenged by a class of debtors as violating the stay's prohibition on any 'act to obtain possession of or exercise control over property of the estate.' The Seventh Circuit agreed with the debtors. The Supreme Court reversed.
The Application
Chicago's practice of retaining the impounded vehicles and conditioning their return on payment of fines constituted passive retention, not an affirmative act of exercising control prohibited by § 362(a)(3). The Court found that the city's refusal to return the property, however economically coercive, did not trigger the automatic stay because the stay addresses affirmative actions to obtain or control estate property, not the mere fact of continued possession of property seized before bankruptcy. The appropriate remedy for Chicago's retention was not a stay violation but rather a § 542 turnover proceeding, where the bankruptcy trustee could seek an affirmative court order compelling return of the vehicles. This distinction preserved the stay's core function of halting collection efforts while reserving turnover as the distinct statutory mechanism for recovering pre-bankruptcy-seized assets.
The Conclusion
Unanimous 2021 ruling limiting the scope of the automatic stay in bankruptcy to prohibit new acts of exercising control but not requiring affirmative turnover. Creditors who seized property before a bankruptcy filing may retain it without violating § 362 - though they may still be compelled to return it under § 542. The ruling maintains the availability of the turnover mechanism as the appropriate remedy.
No circuit court data for this case.
Case Analysis
Overview
City of Chicago v. Fulton (2021) held unanimously that a creditor who passively retains property already seized before a debtor files for bankruptcy does not violate the automatic stay under 11 U.S.C. § 362(a)(3). The City of Chicago's practice of retaining impounded vehicles and refusing to return them until the owner paid overdue fines did not constitute a new act of exercising control over estate property. It was simply not returning property. The ruling rejected the minority view that the automatic stay imposes an affirmative duty to turn over property.
Facts
Chicago impounded vehicles for unpaid parking tickets and fines. After the owners filed for bankruptcy, the automatic stay took effect. Chicago refused to return the vehicles unless the owners paid their fines, a practice challenged by a class of debtors as violating the stay's prohibition on any 'act to obtain possession of or exercise control over property of the estate.' The Seventh Circuit agreed with the debtors. The Supreme Court reversed.
Issue
Whether a creditor who passively retains property seized before a bankruptcy filing violates the automatic stay under 11 U.S.C. § 362(a)(3), which prohibits 'any act to obtain possession of or exercise control over property of the estate.'
Rule
11 U.S.C. § 362(a)(3) stays 'any act to obtain possession of or to exercise control over property of the estate.' The stay stops affirmative acts but does not in itself impose an obligation to return property already in the creditor's possession. 11 U.S.C. § 542(a) separately requires turnover of estate property. Creditors who retain property may be compelled to return it through a § 542 turnover order, not the automatic stay.
Analysis
Chicago's practice of retaining the impounded vehicles and conditioning their return on payment of fines constituted passive retention, not an affirmative act of exercising control prohibited by § 362(a)(3). The Court found that the city's refusal to return the property, however economically coercive, did not trigger the automatic stay because the stay addresses affirmative actions to obtain or control estate property, not the mere fact of continued possession of property seized before bankruptcy. The appropriate remedy for Chicago's retention was not a stay violation but rather a § 542 turnover proceeding, where the bankruptcy trustee could seek an affirmative court order compelling return of the vehicles. This distinction preserved the stay's core function of halting collection efforts while reserving turnover as the distinct statutory mechanism for recovering pre-bankruptcy-seized assets.
Conclusion
**Unanimous 2021 ruling limiting the scope of the automatic stay in bankruptcy to prohibit new acts of exercising control but not requiring affirmative turnover.** Creditors who seized property before a bankruptcy filing may retain it without violating § 362. Though they may still be compelled to return it under § 542. The ruling maintains the availability of the turnover mechanism as the appropriate remedy.
Notes
OT2020. Added via SCOTUS bulk import 2026-05-14
Flag an issue
This tracker is maintained by BrynoDC and is free because readers fund it. Support