Chicago’s New Program Erases Parking Tickets after a Chapter 7 Bankruptcy

Over the past couple of years, investigative journalists have shown that Chicago’s parking ticket system disproportionately punished Black and Hispanic communities. In response, the city council recently made a drastic change. In November of last year, they amended the municipal code so that a person filing chapter 7 bankruptcy can erase parking tickets that are at least 3 years old.  The change went into effect on January 1, 2019. 
 
To be perfectly clear, the bankruptcy laws have not changed. Bankruptcy law is federal law, to change it would take an act of the United States Congress. Given the current state of federal politics, that is unlikely to happen anytime soon. So, as has always been the case, a chapter 7 bankruptcy will NOT discharge your parking ticket debt. Traditionally, you had to file a chapter 13 bankruptcy to discharge parking ticket debt. The difference is that a chapter 7 is known as a “direct” bankruptcy, meaning that if you qualify, you file it and without paying back anything, all of your debts are discharged (cancelled). But bankruptcy law states that some debts do not go away in a Chapter 7. The most commonly known of these debts is parking tickets. A chapter 13, on the other hand, provides what is known as a “super-discharge,” which does cancel parking ticket debt. However, a chapter 13 requires that a debtor pay all of their disposable income every month into a “plan” for 3 to 5 years, ultimately paying back part of their debts at a reduced percentage. Upon the successful completion of the plan, the remaining debts are discharged, including parking tickets.
 
Bankruptcy law has not changed. Instead the city of Chicago created a new program focused on helping debtors in a Chapter 7 bankruptcy. The thought process behind the program is that people who most needed a chapter 7, were being forced into filing a chapter 13 and making monthly payments that they couldn’t afford. Once the debtors failed to make their payments, the chapter 13 would be dismissed and the debtors were right back where they started. Parking ticket debt still there, licenses suspended, cars booted or towed.
 
How does the program work? It’s pretty simple actually. Here are the steps.
 

1. File a chapter 7 bankruptcy and successfully receive a discharge;
2. Enter a payment plan with the city for any tickets that are less than 3 years old, without any late fees or penalties;
3. Successfully complete the payment plan described in step #2.

 
If you complete these steps, the city will erase any parking tickets that are more than 3 years old (from the time the bankruptcy is filed), and will erase late fees and penalties on all tickets regardless of age. It’s a good program.
 
The biggest setback of this program is that it only erases parking tickets that are older than 3 years. For a debtor with a lot of parking tickets in the last 3 years, a chapter 13 bankruptcy may still be the better option. Figuring out which option is better, comes down to dollars and cents. If the city’s payment plan under the new program requires a debtor to pay $1500 up front and $250 per month, but a chapter 13 plan only requires a monthly payment of $50, the chapter 13 is likely to be the better choice.
 
You should also consider how the bankruptcy will affect your other debts and property, and the positive or negative impact on your credit. You should NOT file bankruptcy before consulting with an experienced attorney. An experienced bankruptcy attorney can help you figure out what is best for your specific situation. The lawyers at Robson & Lopez LLC are happy to help you out. Our consultations are always FREE. Call us today at (312) 523-2166.