31 F.4th 1014
7th Cir.2022Background
- Chicago ordinance authorizes a possessory lien on vehicles impounded for unpaid traffic/parking tickets after a specified number of "final determinations of liability" and related impoundment procedures.
- The lien amount includes unpaid fines plus towing, storage, administrative and attorney fees.
- Debtor Marcella Mance’s car was impounded and subject to a possessory lien of $12,245 while the car’s claimed value was about $3,000; Mance filed Chapter 7 and sought to avoid the lien under 11 U.S.C. § 522(f).
- Key procedural steps (notice, opportunity to contest, administrative hearings, final determinations, eligibility adjudication, and immobilization/towing) occur before the City’s lien attaches.
- Lower courts (bankruptcy and district) held the impoundment lien is a "judicial lien" (therefore avoidable under § 522(f)); the City appealed.
- The classification is consequential: judicial liens are avoidable in bankruptcy under § 522(f); statutory liens (which arise "solely by force of statute") are not.
Issues
| Issue | Mance's Argument | City of Chicago's Argument | Held |
|---|---|---|---|
| Whether Chicago's possessory impoundment lien is a "judicial lien" or a "statutory lien" under 11 U.S.C. § 101 (impacting avoidability under § 522(f)) | The lien flows from prior adjudications and quasi‑judicial processes (final determinations and impoundment hearings); thus it is "obtained by" legal process and is a judicial lien, so it is avoidable. | The ordinance makes the vehicle "shall be subject to a possessory lien" upon impoundment; the lien therefore "arises solely" by statute and is statutory (not avoidable). | The lien is judicial: because the lien depends on prior adjudications and quasi‑judicial procedures, it does not arise solely by statute and thus is avoidable under § 522(f). |
Key Cases Cited
- In re Fulton, 926 F.3d 916 (7th Cir. 2019) (addressing City of Chicago impoundment practices and final determinations as money judgments)
- Field v. Mans, 516 U.S. 59 (1995) (interpretive guidance on causation language in statute)
- In re Schick, 418 F.3d 321 (3d Cir. 2005) (holding certain motor‑vehicle surcharge liens were statutory)
- Financial Oversight & Management Board for Puerto Rico v. Aurelius Inv., 899 F.3d 1 (1st Cir. 2018) (summarizing Bankruptcy Code’s mutually exclusive lien categories)
- In re Willett, 544 F.3d 787 (7th Cir. 2008) (reviewing lien classification as a legal question)