A federal appeals panel has determined that a bankruptcy filing shouldn’t offer protection from traffic fines.
The U.S. Seventh Circuit Court of Appeals issued an opinion March 14 in a consolidated appeal from the city of Chicago, which has been trying to get money from car owners who said bankruptcy proceedings precluded them from paying speeding, red light and parking tickets. Seventh Circuit Judge Frank Easterbrook wrote the opinion, with judges Ilana Diamond Rovner and David Hamilton concurring.
According to the opinion, Chicago’s municipal code makes vehicle owners, not drivers, responsible for traffic tickets. The city said seven debtors failed to pay 72 fines totaling nearly $12,000 because their Chapter 13 bankruptcy estates — which technically own the vehicles — can ignore the tickets because there is no provision for the payment of fines incurred after filing for bankruptcy, and that their cars can’t be towed or booted.
Chief Bankruptcy Judge Pamela Hollis denied the city’s motion to vacate the orders, keeping the vehicles in the Chapter 13 estates. Easterbrook noted Hollis said she hadn’t read the city’s motions.
“The only reason she gave is that the court as an institution routinely keeps all assets in all Chapter 13 estates,” Easterbrook wrote. “She did not say why she and her colleagues do this — and, as far as the parties are aware, or we could ascertain, the court has never explained why it made this decision.”
In the alternative, the city asked Hollis to treat the fines as administrative expenses needed to preserve each estate’s holdings. She denied that motion as well, and U.S. District Judge Elaine Bucklo affirmed that ruling.
“Immunity from traffic laws for the duration of a Chapter 13 plan does not seem to us an outcome plausibly attributed to the Bankruptcy Code,” Easterbrook wrote. “Nothing in the text of the Code so much as hints at such an objective, and one point of returning property to the debtors’ ownership … is to ensure that debtors pay the ordinary and necessary expenses of maintaining that property.”
The Seventh Circuit panel maintained the Hollis and Bucklo rulings departed from the statutory norm without reason.
“Lawyers representing these debtors, the bankruptcy trustee, and three amici curiae have attempted to supply reasons, but silence from the bankruptcy court makes that futile,” Easterbrook wrote. “The statute calls for an exercise of discretion by federal judges, not an exercise of imagination by the bar.”
The panel said it understood the theory of Chapter 13 protection allowing people in bankruptcy to keep assets like cars in order to earn money to pay off debts, but exempting such people from things like traffic fines allows them to preserve their assets without paying the assets’ expenses.
“Operating a car is costly,” Easterbrook wrote. “The owner or lessee must pay for insurance, gasoline, repairs, maintenance and parking, among other things. Private providers of parking must be paid. The effect of the bankruptcy court’s orders, however, is that public providers of parking (that is to say, city streets) need not be paid. Other involuntary creditors, such as victims of accidents caused by speeding or running red lights, likewise could be stiffed in the name of permitting debtors to keep their cars and jobs.”
During oral arguments on Sept. 12, Easterbrook said the panel asked if there was any effect to this approach “other than sheltering scofflaws” and got no answer.
The panel reversed the ruling and said the city is entitled to an order restoring the Chapter 13 estates’ assets to the debtors’ personal ownership for the purpose of being held liable for fines.