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On January 14, 2021, the United States Supreme Court handed down their decision in City of Chicago v. Fulton, No. 19-357, 2021 WL 125106 (Jan. 14, 2021). The question before the Court was whether an entity violates §362(a)(3) by retaining possession of a debtor’s property after a bankruptcy petition is filed. The Court held that mere retention of estate property after the filing of a bankruptcy petition does not violate §362(a)(3) of the Bankruptcy Code.
Until this decision, the majority position held by the Second, Seventh, Eighth, Ninth, and Eleventh Circuits was that the automatic stay prohibited a creditor’s passive retention of property seized before a bankruptcy case began. Weber v. SEFCU (In re Weber), 719 F.3d 72, 81 (2d Cir. 2013); Thompson v. General Motors Acceptance Corp., 566 F.3d 699 (7th Cir. 2009), Knaus v. Concordia Lumber Co. (In re Knaus), 889 F.2d 773, 775 (8th Cir. 1989); California Emp’t Dev. Dep’t v. Taxel (In re Del Mission Ltd.), 98 F.3d 1147, 1151 (9th Cir. 1996); Motors Acceptance Corp. v. Rozier (In re Rozier), 376 F.3d 1323, 1324 (11th Cir. 2004).
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