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Supreme Court Rules on Seized Property in Bankruptcy

bankruptcy Chicago Judiciary Supreme Court US

Supreme Court Rules on Seized Property in Bankruptcy

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The Supreme Court has ruled that debtors are not entitled to have impounded property immediately returned to them as soon as they declare bankruptcy. The 8-0 opinion in the case known as City of Chicago v. Fulton was written by Justice Samuel Alito. Justice Amy Coney Barrett, who was not yet a member of the high court when the case was argued Oct. 13, did not participate in the case. Justice Sonia Sotomayor filed a separate, concurring opinion. When a debtor files a petition for bankruptcy, the U.S. Bankruptcy Code protects the debtor’s interests by imposing an automatic stay “applicable to all entities” on efforts to collect pre-petition debts outside the bankruptcy proceeding. Efforts to exercise control over the property of the bankruptcy estate are forbidden. “The question in this case is whether an entity violates that prohibition by retaining possession of a debtor’s property after a bankruptcy petition is …

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