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Jones v. City of Chicago (In re Tony R. Jones)

22 AP 00206, 16 BK 26076
Six years after a chapter 7 debtor obtained a discharge and the case was closed, without moving to re-open the case, the debtor filed an adversary complaint, asserting individual and class claims against the City of Chicago.  He alleged the City violated the automatic stay under 11 U.S.C. §§ 362(a)(2), (a)(5), (a)(6) and 554(c) due to its pre-petition impoundment, repossession, and eventual disposal of his and other debtors’ vehicles.  The debtor argued the City’s possessory lien was invalid under Illinois law.  The City moved to dismiss under Fed. R. Civ. P. 12(b)(1) and (b)(6), alleging subject-matter jurisdiction was lacking because the debtor lacked standing to assert stay violations and a violation of the turnover statute.  The City argued only the chapter 7 trustee had the right to demand turnover, and since the trustee had declined the City’s offer to turn over the vehicle and did not authorize the vehicle’s release, the City did not violate the stay or turnover provisions by withholding the vehicle from him.  The Debtor had scheduled the vehicle and the City’s pre-petition lien thereon but did not claim it as exempt.

The court granted the City’s motion to dismiss with prejudice, finding the Debtor (and class plaintiffs) lacked standing because he did not credibly allege he (or the other plaintiffs) had an interest in the vehicle by claiming an exemption and could not show that the vehicle was abandoned to him under § 554 prior to the closure of the Chapter 7 case.  The court found the Debtor (and class plaintiffs) failed to state a claim because while the case was pending, the vehicle belonged to the bankruptcy estate and the City was not obligated to turn it over to the debtor.  When the case ended, the City’s lien survived the debtor’s discharge; the City rightfully maintained possession of the vehicle.  The court also found that state court would be a more appropriate forum to rule on the validity of the City’s claim that it held a possessory lien.

Thursday, February 15, 2024