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Problem 4

The Scofflaw and the Stay

The White Whale (“Whale”) was a notorious scofflaw, racking up parking tickets for which he never made payment to the city (the “City”). Fed up with Whale’s antics, the City enacted an ordinance that permits the City to immobilize and impound a vehicle if its owner has at least three outstanding parking fines against the owner that are over a year old. To further strengthen the City’s position, the ordinance also provides the City with a possessory lien over the impounded vehicle. The new ordinance did not deter Whale, who continued to display complete disregard for the City’s parking regulations. The City’s dedicated parking department eventually caught up with Whale and immobilized and impounded his vehicle. Desperately seeking to regain possession of his prized Dodge Diplomat, but without the funds available to satisfy years’ worth of fines, Whale files bankruptcy and provides notice to the City.

Question 1

Does the City need to return the vehicle upon being notified of the bankruptcy filing?

Question 2

Should the police and regulatory power exception under section 362(b)(4) insulate the City from any potential stay violation? What about section 362(b)(3), which allows acts to perfect or continue perfection of liens?

Question 3

If a secured creditor is obligated to turnover collateral in its possession, how can the secured creditor still protect its interest in the collateral?

Question 4

What local rule additions or changes could bankruptcy courts implement to relieve the burdens on debtors or creditors of seeking turnover or adequate protection, respectively?