City of Chicago v. Fulton was decided by the U.S. Supreme Court on January 14, 2021. The case centered around whether the City of Chicago's refusal

City of Chicago v. Fulton was decided by the U.S. Supreme Court on January 14, 2021. The case centered around whether the City of Chicago's refusal

to return impounded vehicles after the vehicle owners filed for

bankruptcy violated the "automatic stay" provision of the U.S. Bankruptcy Code, which is designed to prevent creditors from taking collection actions against a debtor who has filed for bankruptcy protection.

In a unanimous decision, the Supreme Court held that the City of Chicago did not violate the automatic stay provision by retaining possession of the impounded vehicles. The Court reasoned that merely retaining possession of the property did not constitute an "act" to exercise control over it, as required by the automatic stay provision.

Since the ruling, lower courts have interpreted the decision in various ways: 1. Clarification of the automatic stay provision: Lower courts have generally followed the Supreme Court's guidance that merely retaining possession of property post-bankruptcy filing does not constitute an "act" that violates the automatic stay provision. This has helped to clarify the scope and application of the provision in bankruptcy cases. 2.

Fact-specific analysis: Lower courts have also recognized that the Fulton decision is fact-specific, and they have carefully analyzed the facts of each case to determine whether a creditor's actions violate the automatic stay provision. As a result, Fulton has not provided a blanket rule that allows creditors to retain possession of property in all circumstances; rather, it has emphasized the need for a case-by-case evaluation. 3. Distinguishing between active and passive conduct: Lower courts have used the Fulton decision to distinguish between active conduct (which may violate the automatic stay) and passive conduct (which does not).

Retaining possession of property, as in the Fulton case, has generally been considered passive conduct. However, if a creditor takes additional actions to exercise control over the property or to gain a benefit from it, such actions might be considered active conduct and could potentially violate the automatic stay.

In summary, lower courts have interpreted the Supreme Court's ruling in City of Chicago v. Fulton as providing guidance on the scope and application of the automatic stay provision under the U.S. Bankruptcy Code.

The decision has clarified that merely retaining possession of property does not violate the automatic stay, but it has also emphasized the need for a case-by-case evaluation to determine whether a creditor's actions are active or passive and whether they violate the provision.

The holding in City of Chicago v. Fulton does not directly address the issue of whether a creditor violates the automatic stay by not taking affirmative steps to dissolve a pre-petition garnishment after a bankruptcy petition is filed. Fulton specifically dealt with the City of Chicago retaining possession of impounded vehicles post-bankruptcy filing.

However, the Fulton decision does help to clarify the distinction between active and passive conduct by creditors in the context of the automatic stay provision. It's important to remember that Fulton doesn't provide a blanket rule that covers all situations, so the analysis of a creditor's actions in relation to a pre-petition garnishment would still require a case-by-case evaluation.

Generally, under the automatic stay provision (11 U.S.C. § 362), a broad range of collection activities are prohibited once a debtor files for bankruptcy. This includes actions to create, perfect, or enforce a lien against the debtor's property. In the context of garnishment, it is generally understood that continuing to garnish wages post-petition would violate the automatic stay.

Thus, a creditor may need to take affirmative steps to release the garnishment.

However, it's important to note that specific circumstances and local rules may affect the analysis of whether a creditor's failure to dissolve a pre-petition garnishment constitutes a violation of the automatic stay. Courts may consider factors such as the creditor's knowledge of the bankruptcy filing and whether the failure to act was a result of oversight or willful disregard. It's always best to consult with an attorney who can provide advice based on the specifics of a given situation.