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SCOTUS, Bankruptcy And Return Of Repossessed Property

The U.S. Supreme Court is considering whether creditors must immediately return repossessed or impounded property when the owner subsequently files for bankruptcy, an issue that has generated a split among the circuits.

Chicago v. Fulton, which the justices will hear Tuesday, involves Chicago’s practice of impounding vehicles when their owners rack up unpaid parking or traffic fines. Despite the narrow focus on consumer debtors who file for bankruptcy under Chapter 13, the case could have broad implications for other areas of bankruptcy law, including Chapter 11 reorganizations.

“The case presents a real existential threat to Chapter 11 reorganizations,” David Kuney, an adjunct professor of bankruptcy at Georgetown University Law Center, told Bloomberg Law. “It’s a sleeper case; there’s more to it than meets the eye.”

The potential impact on bankruptcy law has drawn several amicus briefs on both sides of the issue, including from the Trump administration and the National Association of Bankruptcy Trustees.

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