On April 21, 2022, the United States Court of Appeals for the Seventh Circuit ruled that City of Chicago parking tickets are judicial liens that can be avoided under Section 522(f) of the Bankruptcy Code. The ruling in City of Chicago v. Mance is the latest development in the series of decisions that have stemmed from the City’s aggressive tactics in collecting parking fines from drivers who file for bankruptcy. City of Chi. v. Mance (In re Mance), No. 21-1355 (7th Cir. Apr. 21, 2022).

At issue in this case was whether the possessory liens that result from the City impounding vehicles due to unpaid parking tickets are judicial liens or statutory liens. Judicial liens can be avoided under §522(f) if the value of the liens on the property plus the amount of the exemption to which debtor is entitled exceeds the value of debtor’s interest in the property. In Mance, the liens on Debtor’s vehicle totaled $12,245 on a car valued at $3,000.

Statutory liens, however, cannot be avoided, and the City argued that its liens on impounded vehicles are non-avoidable statutory liens. By definition, statutory liens are liens “arising solely” from a statute as opposed to judicial liens that are “obtained by” judgment or other legal process.

The Seventh Circuit ruled that even though a statute (in this case a City ordinance) authorizes the liens on impounded vehicles, the liens do not arise solely from the statute but instead from quasi-judicial procedures by which the City issues the “final determinations” that are prerequisites to impoundment.

Mance is good news for Chicago debtors with impounded vehicles who are seeking relief from exorbitant parking tickets. Depending on the value of their vehicle and the amount of the liens, they may be able to use the bankruptcy code’s lien avoidance powers to remove City liens and recover their vehicles.

For questions about the Seventh Circuit's ruling or bankruptcy matters generally, please contact Robert R. Benjamin or an attorney in GCT's Reorganization and Bankruptcy Practice Group.