Bankruptcy Chapter 13 Payment Plan.

Byline: Derek Hawkins

7th Circuit Court of Appeals

Case Name: Kiera S. Cherry, et al., v. City of Chicago, Illinois

Case No.: 19-1534; 19-1558

Officials: EASTERBROOK, ROVNER, and HAMILTON, Circuit Judges.

Focus: Bankruptcy Chapter 13 Payment Plan

This is the thirdand we hope finaldecision in a series arising from the efforts of debtors in Chapter 13 bankruptcy proceedings to avoid or defer paying parking and other vehicular fines. The first decision, In re Steenes, 918 F.3d 554 (7th Cir. 2019) (Steenes I), interprets 11 U.S.C. 1327(b), which provides: Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor.

The Bankruptcy Court for the Northern District of Illinois adopted a form confirmation order for Chapter 13 plans that retained all property in the estate, notwithstanding this statutory presumption. Because fines for parking and other vehicular offenses in Chicago are assessed against the car's owner, keeping cars in the estates meant that the automatic stay of 11 U.S.C. 362 prevented the City from using collection devices such as towing or booting. More: because the plans did not list fines as payable debts, the confirmation orders overrode any obligation to pay them.

Steenes I holds that this approach conflicts with 1327(b). We recognized that judges have discretion to keep property in an estate but added that "the exercise of all judicial discretion requires a good reason." 918 F.3d at 557. Debtors may need cars but also must pay the cost of their maintenance insurance, repairs, gasoline, and parking, among other things. Using the bankruptcy process to enable debtors to operate cars while avoiding the costs that others must pay is not appropriate. We wrapped up: A case-specific order...