City of Chicago v. Lucinda Davis ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 19-1534 & 19-1558
IN THE MATTER OF:
KIERA S. CHERRY and LUCINDA E. DAVIS,
Debtors.
APPEALS OF:
CITY OF CHICAGO, ILLINOIS
____________________
Appeals from the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division.
Nos. 18 B 25113 & 33492 — A. Benjamin Goldgar, Chief Bankruptcy Judge.
____________________
SUBMITTED MAY 11, 2020 — DECIDED JULY 6, 2020
____________________
Before EASTERBROOK, ROVNER, and HAMILTON, Circuit
Judges.
EASTERBROOK, Circuit Judge. This is the third—and we
hope final—decision in a series arising from the efforts of
debtors in Chapter 13 bankruptcy proceedings to avoid or
defer paying parking and other vehicular fines.
2 Nos. 19-1534 & 19-1558
The first decision, In re Steenes, 918 F.3d 554 (7th Cir.
2019) (Steenes I), interprets 11 U.S.C. §1327(b), which pro-
vides:
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 stat-
utory presumption. Because fines for parking and other ve-
hicular 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 collec-
tion devices such as towing or booting. More: because the
plans did not list fines as payable debts, the confirmation or-
ders 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 discre-
tion 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, supported by good case-specific reasons,
would be consistent with §1327(b), but none was entered in any
of these cases.
918 F.3d at 558. See also In re Heath, 115 F.3d 521, 524 (7th
Cir. 1997) (anticipating this conclusion).
Nos. 19-1534 & 19-1558 3
Soon after Steenes I issued, bankruptcy judges in the
Northern District of Illinois changed their form confirmation
order to eliminate the provision that inverted the statutory
presumption, but the court added to a different form a
checkbox through which debtors could elect the same thing.
Chicago opposed the confirmation of plans proposed by
debtors who checked that box.
A bankruptcy judge denied the objection and approved
the plan proposed by Kiera Cherry, the debtor in the lead
case. The judge stated from the bench that debtors need not
explain why they want to retain a given asset in the estate. In
response to the City’s contention that case-specific reasons
are essential to a departure from the statutory presumption,
the judge said that Steenes I applies only to judicial findings.
Because “debtors don’t make findings”, they also need not
explain their choices—and because the judge read the statute
to allow debtors to keep assets in the estate without reasons,
he added that the judiciary need not justify approval of a
plan reflecting a debtor’s choice. The judge stated that he
would summarily deny any objection to the confirmation of
similar plans. When the City objected to a plan proposed by
Lucinda Davis, the judge did just that.
Chicago and the debtors jointly asked us to accept ap-
peals direct to the court of appeals, bypassing the district
court, on the authority of 28 U.S.C. §158(d)(2)(A). We grant-
ed that motion but deferred the filing of briefs until we had
decided a follow-up to Steenes I.
That successive decision, In re Steenes, 942 F.3d 834 (7th
Cir. 2019) (Steenes II), interprets 11 U.S.C. §507(a)(2), which
defines administrative expenses that bankruptcy estates
must pay even though not listed on debtors’ schedules. We
4 Nos. 19-1534 & 19-1558
held that vehicular fines are administrative expenses under
§507(a)(2).
We deferred briefing in Cherry and Davis because we
thought that the parties might conclude that the resolution
no longer mamers. Whether a car’s title returns to the owner
on confirmation of the plan or remains in the estate, vehicu-
lar fines must be paid. Cherry and Davis should be current
on fines because, although the bankruptcy court allowed
their cars to remain in the Chapter 13 estates, the fines are
administrative expenses under Steenes II.
Still, the parties proceeded to brief the merits. Even with
the fines classified as administrative expenses, the City must
rely on the estate to remit the money. The automatic stay of
enforcement devices such as towing appears to make it hard
to collect fines, so the City seeks a remedy—removal of the
autos from the estates—that enables it to use these devices
without case-specific motions to lift the stay.
Cherry and Davis defend the bankruptcy judge’s ap-
proach, but it is as inconsistent with the statute as the ap-
proach disapproved in Steenes I. Here again is the language
of §1327(b):
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.
This treats “a provision in the plan” and “the order confirm-
ing the plan” identically. We held in Steenes I that the statu-
tory presumption—“confirmation of a plan vests all of the
property of the estate in the debtor”—means that there must
be a good case-specific reason for doing otherwise. Whether
the debtor (by checking a box) or the judge (through a form
order) proposes the departure from the statutory norm does
Nos. 19-1534 & 19-1558 5
not affect the need for justification. And, Steenes I held, a de-
sire to obtain free parking, or otherwise get the benefit of a
car without satisfying all ongoing expenses of driving, is not
a good reason.
Steenes I observes that the debtors had not contended that
keeping cars in the estates “has any effect, any at all, other
than sheltering scofflaws.” 918 F.3d at 558. Cherry and Davis
likewise are silent. Instead they contend that a debtor’s
choice prevails even if it is made simply to avoid the payment
of fines. As we replied in Steenes I: “Immunity from traffic
laws for the duration of a Chapter 13 plan does not seem to
us an outcome plausibly amributed to the Bankruptcy Code.”
918 F.3d at 557.
Cherry reminds us that a bankruptcy court must confirm
any plan that satisfies 11 U.S.C. §1325(a). Because that sub-
section does not address whether the estate holds assets such
as cars, Cherry contends that it cannot mamer why a given
debtor checks the box. Yet §1325(a)(1) tells us that a court
must confirm a plan if it “complies with the provisions of
this chapter and with the other applicable provisions of this
title”. Section 1327(b) is one of those provisions. It need not
be mentioned separately in §1325(a).
A bankruptcy court may confirm a plan that holds prop-
erty in the estate only after finding good case-specific rea-
sons for that action. Because the bankruptcy court approved
these plans without finding that such reasons exist, its orders
are
REVERSED.