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Abstract: In City of Chicago v. Fulton, the U.S. Supreme Court held that a creditor's “mere retention” of a debtor's property after the debtor files for bankruptcy does not violate the portion of the Bankruptcy Code's automatic stay that forbids creditors from acts to obtain possession of, or exercise control over, a debtor's property. The upshot of the decision was that Chicago could continue its policy of refusing to turn over debtors' impounded vehicles without fear of violating that portion of the automatic stay.
From a textual standpoint, Fulton was an easy case. Justice Alito's opinion presented a straightforward textual analysis, one that was backed by all members of the Court. Although academics and practitioners can-- and did--quibble over the text, the Supreme Court saw little room for disagreement over the statute's meaning.
But a closer look at Fulton reveals a thorny problem lurking below the surface of all that clean textual analysis. As Justice Sotomayor took pains to emphasize in her concurring opinion, the practical implications of the Court's opinion for debtors are much more troublesome. Drawing attention to the hardship debtors such as respondent George Peake suffer due to policies like those used by the Chicago, Sotomayor suggested that perhaps the bankruptcy statute or rules should change to speed up the process by which debtors can get their property back.
As I have written in previous issues of this publication, the Supreme Court tends to take baby steps with its bankruptcy jurisprudence, favoring narrow resolution of the immediate issue before it. The Court's decision in Fulton raises questions about who--or which body of government-- ought to do more when faced with a policy that interferes with bankruptcy's fresh start goal and has a disproportionate impact on low-income communities of color, yet remains firmly within the letter of the law.
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