In re: Chester B. Steenes

In the
United States Court of Appeals
For the Seventh Circuit
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Nos. 17-3630, 17-3663 & 17-3664
IN THE MATTER OF:
CHESTER B. STEENES, et al.,
Debtors-Appellees.
APPEALS OF:
CITY OF CHICAGO, ILLINOIS
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Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
Nos. 17 C 2308 et al. — Elaine E. Bucklo, Judge.
Nos. 17 B 23867 & 17 B 32345 — Pamela S. Hollis, Chief Bankruptcy Judge.
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ARGUED SEPTEMBER 12, 2018 — DECIDED MARCH 14, 2019
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Before EASTERBROOK, ROVNER, and HAMILTON, Circuit
Judges.
EASTERBROOK, Circuit Judge. An application for relief un-
der Chapter 13 of the Bankruptcy Code transfers most of a
debtor’s assets to the newly formed bankruptcy estate. 11
U.S.C. §§ 541, 1306. Property stays in the estate until the
bankruptcy court confirms a plan of payment. Then,
“[e]xcept as otherwise provided in the plan or the order

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2 Nos. 17-3630, 17-3663 & 17-3664
confirming the plan, the confirmation of a plan vests all of
the property of the estate in the debtor.” 11 U.S.C. §1327(b).
This means that the debtor becomes personally responsible
for the expenses of maintaining that property.
Although the statute presumptively returns the estate’s
property to the debtor, the Bankruptcy Court for the North-
ern District of Illinois has adopted a form order reversing
this presumption and maintaining the property in the estate
for the duration of the plan, which can be for as long as five
years. Some debtors treat this as permission to violate traffic
laws. The City of Chicago makes a car’s owner, rather than
its driver, liable for many fines, including those for speeding,
running a red light, and illegal parking. See, e.g., Chicago
Municipal Code §9-101-020(a). Chicago tells us that, after
their payment plans were confirmed, the seven debtors in
these consolidated appeals incurred, and failed to pay, at
least 72 fines aggregating almost $12,000. The debtors assert
that the estates can ignore their tickets because a Chapter 13
plan does not provide for the payment of post-petition fines
and that the automatic stay of 11 U.S.C. §362 prevents the
cars from being towed or booted. The upshot appears to be
that these fines will never be paid.
Chicago asked the court to vacate the orders keeping the
vehicles in the estate. After stating on the record that she had
not read the City’s motions, Chief Bankruptcy Judge Hollis
summarily denied them. She did not mention §1327(b), and
the only reason she gave is that the court as an institution
routinely keeps all assets in all Chapter 13 estates. She did
not say why she and her colleagues do this—and, as far as
the parties are aware, or we could ascertain, the court has
never explained why it made this decision.

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Nos. 17-3630, 17-3663 & 17-3664 3
As a fallback, the City asked the bankruptcy court to treat
the fines as administrative expenses, necessary for the
preservation of each estate’s property. See 11 U.S.C.
§503(b)(1); Reading Co. v. Brown, 391 U.S. 471 (1968). Chief
Bankruptcy Judge Hollis denied that motion too, this time
with an opinion, 569 B.R. 733 (Bankr. N.D. Ill. 2017), and a
district judge affirmed. 281 F. Supp. 3d 702 (N.D. Ill. 2017).
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. Nothing in the text of the Code so
much as hints at such an objective, and one point of return-
ing property to the debtors’ ownership under §1327(b) is to
ensure that debtors pay the ordinary and necessary expenses
of maintaining that property.
Section 1327(b) gives bankruptcy judges discretion to
hold assets in the estate in particular cases, but the exercise
of this discretion—like the exercise of all judicial discre-
tion—requires a good reason. “[A] motion to [a court’s] dis-
cretion is a motion, not to its inclination, but to its judgment;
and its judgment is to be guided by sound legal principles.”
United States v. Burr, 25 F. Cas. 30, 35 (No. 14692d) (C.C. Va.
1807) (Marshall, C.J.). See also, e.g., United States v. Corner,
598 F.3d 411, 415 (7th Cir. 2010) (en banc). The bankruptcy
court has not given a reason—not for flipping the statutory
presumption as a norm, not for denying the City’s motions
in these debtors’ cases.
It is hard to see how the court could justify routinely do-
ing the opposite of what the statute provides. Cf. Law v.
Siegel, 571 U.S. 415, 424–25 (2014) (a bankruptcy court’s equi-
table power cannot be used to contradict rules in the Bank-
ruptcy Code). Section 1327(b) tells us what the norm must

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4 Nos. 17-3630, 17-3663 & 17-3664
be. And the absence of a reason for departing from the statu-
tory norm in any particular case makes it impossible for us
to sustain the bankruptcy court’s decisions.
Lawyers representing these debtors, the bankruptcy trus-
tee, and three amici curiae have amempted to supply reasons,
but silence from the bankruptcy court makes that futile. The
statute calls for an exercise of discretion by federal judges,
not an exercise of imagination by the bar.
And the reasons now proffered by counsel would have
been inadequate, had they been articulated by bankruptcy
judges. The rationale is that many debtors need cars to earn
a living. If they lose their jobs, they will be unable to make
the payments called for by the Chapter 13 plans, and the
function of that chapter—which allows debtors to keep their
assets in exchange for partial payment—would be defeated.
The problem with this rationale is that it does not explain
why Chapter 13 permits debtors to use particular assets to
earn money without paying the assets’ expenses. Operating
a car is costly. The owner or lessee must pay for insurance,
gasoline, repairs, maintenance, and parking, among other
things. Private providers of parking must be paid. The effect
of the bankruptcy court’s orders, however, is that public pro-
viders of parking (that is to say, city streets) need not be
paid. Other involuntary creditors, such as victims of acci-
dents caused by speeding or running red lights, likewise
could be stiffed in the name of permiming debtors to keep
their cars and jobs. Yet the debtors have not offered a reason
for thinking that debtors must pay for insurance and parking
in private lots, but not for reckless driving or parking on
public streets. We asked at oral argument if the bankruptcy

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Nos. 17-3630, 17-3663 & 17-3664 5
court’s global order has any effect, any at all, other than shel-
tering scofflaws. No one was able to suggest such an effect.
When a car is important to earning the income needed to
carry out a Chapter 13 plan, the bankruptcy court can forbid
the vehicle’s repossession by the lienholder, whose self-help
remedy is displaced by payments under a confirmed plan.
Going beyond that and permiming debtors to park for free
wherever they like, or to drive without a risk of fines for
moving violations, has nothing to recommend it. The Bank-
ruptcy Code cannot reasonably be read to enlist the judici-
ary’s aid in permiming debtors to violate the law. Nor should
it be necessary, before a public body can collect a $50 park-
ing ticket, for it to pay the cost of counsel to file a motion to
lift the automatic stay, 11 U.S.C. §362(d), or dismiss the
whole case for abusive conduct, see 11 U.S.C. §1307(c), one
debtor at a time.
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. Chicago therefore is entitled to
the principal relief it seeks: an order restoring the estates’
assets to the debtors’ personal ownership. Chicago tells us
that, if it receives that relief, we need not decide whether
parking and moving-violation fines should be treated as
administrative expenses. On this understanding, we bypass
that subject.
REVERSED

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