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Creditors, Keepers: Passive Retention of Estate Property and the Automatic Stay

Posted by on Tuesday, April 20, 2021 in Notes, Volume 74, Volume 74, Number 3.

The automatic stay provision is one of the most important provisions in the Bankruptcy Code. Until recently, however, it has remained unclear if passive retention of property of the bankruptcy estate must be immediately turned over to the debtor under the automatic stay provision. The Supreme Court decided in City of Chicago v. Fulton that passive retention does not violate the automatic stay, saving creditors from the consequences of retaining estate property. The debate about the stay, however, is far from over. Many circuit courts were already concerned about the policy issues deriving from the City of Chicago maintaining possession over debtors’ vehicles, rendering debtors unable to get to work or pay off their debts during the bankruptcy plan. Justice Sotomayor remains frustrated about these policy concerns and called on Congress to change the Code and enable debtors to be more successful in their payment plans. This Note suggests Congress make language and cross-reference changes to the Bankruptcy Code to satisfy both textual and policy issues associated with the current Code.

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Caitlin M. McAuliffe