In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 17-3630

IN THE MATTER OF:

CHESTER B. STEENES and DORIAN DUDLEY,

Debtors-Appellees.

APPEAL OF:

CITY OF CHICAGO, ILLINOIS

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

Nos. 17 C 2308 et al. — Elaine E. Bucklo, Judge.

____________________

SUBMITTED MAY 7, 2019 — DECIDED NOVEMBER 12, 2019

____________________

Before EASTERBROOK, ROVNER, and HAMILTON, Circuit 

Judges.

EASTERBROOK, Circuit Judge. In re Steenes, 918 F.3d 554 (7th 

Cir. 2019) (Steenes I), holds that the confirmation of a payment plan under Chapter 13 of the Bankruptcy Code causes 

the debtor’s assets, including automobiles, to revert to the 

debtor’s personal ownership unless the judge has made a 

debtor-specific finding under 11 U.S.C. §1327(b). We thought

that this conclusion resolved the appeals. Although counsel 
2 No. 17-3630

briefed an additional question—whether automotive fines 

incurred by estates during confirmed Chapter 13 payment 

plans should be treated as administrative expenses—the City 

of Chicago said that this question need not be answered if 

we decided the §1327(b) issue in its favor, as we did.

Two debtors (Chester Steenes and Dorian Dudley) contended in a petition for rehearing that the answer did mafer 

to their situations. Chicago confirmed that this is so and 

added that the City is unwilling to give up its claims against 

these debtors. We therefore granted the petition for rehearing filed by Steenes and Dudley but denied petitions for rehearing filed by the other debtors. Our order provided that 

the administrative-expense question would be resolved using the existing briefs and argument.

Steenes I sets out the basics. After bankruptcy judges confirmed their Chapter 13 payment plans, Steenes and Dudley 

used their cars in ways that led to fines for running red 

lights, illegal parking, and similar offenses. They refused to 

pay, observing that the confirmed plans do not require them 

to pay fines (as opposed to other expenses). Chicago asked 

the bankruptcy and district judges to treat the fines as administrative expenses of the estates in bankruptcy, as long as 

the vehicles remain assets of the estates. Administrative expenses are entitled to priority payment. 11 U.S.C. §507(a)(2).

But the bankruptcy and district judges ruled that the fines 

are not administrative expenses, principally because paying 

them does not promote the debtors’ interests. 569 B.R. 733 

(Bankr. N.D. Ill. 2017), affirmed, 281 F. Supp. 3d 702 (N.D. Ill. 

2017). Unless payment is beneficial to the debtor, the judges 

concluded, an expense is not properly classified as “administrative.” And because, under Chicago’s law, a vehicle’s own-
No. 17-3630 3

er, which means the estate, is the entity that must pay, the 

automatic stay of 11 U.S.C. §362 means that the City cannot 

seize, tow, or immobilize the cars.

Our prior opinion explained that the debtors, including 

Steenes and Dudley, have taken the view that debtors in 

Chapter 13 need not pay vehicular fines. Our opinion replied: “The Bankruptcy Code cannot reasonably be read to 

enlist the judiciary’s aid in permifing debtors to violate the 

law.” 918 F.3d at 558. That is equally true whether the device 

for sheltering scofflaws is holding the asset in the estate (the 

subject of our prior opinion) or authorizing the estate not to 

pay debts incurred during the course of its administration.

Steenes I discussed the debtors’ principal argument: that 

they need autos to earn the money promised to creditors by 

the Chapter 13 plans. We observed that this is true but does 

not justify allowing debtors to avoid the costs of operating 

vehicles. They must pay for gasoline and insurance; similarly they must pay for parking, whether they acquire space

legally or illegally. Allowing debtors in bankruptcy to stiff

involuntary creditors, such as cities trying to collect for onstreet parking, has nothing to recommend it. To the extent 

the bankruptcy and district judges’ resolution of the administrative-expense question is supported by the same “debtors 

need cars” rationale that Steenes I deemed inadequate, it is 

equally bad as a justification for concluding that the expense 

cannot be “administrative” (when a car remains in an estate).

The language on which the bankruptcy and district judges relied appears in 11 U.S.C. §503(b)(1)(A), which says that 

administrative expenses include “the actual, necessary costs 

and expenses of preserving the estate”. Paying fines does not

“preserve” the estate, because the fining jurisdiction’s inabil-
4 No. 17-3630

ity to seize the vehicles means that the estates are protected

without payment. For the same reason payment is not “necessary”. So the bankruptcy and district judges reasoned. But 

on that view no involuntary debt would be an administrative 

expense, because the automatic stay always could be used to 

protect the estate. Only a debt that the estate incurred voluntarily would satisfy the statute. Reading Co. v. Brown, 391 U.S. 

471 (1968), shows that this perspective is incorrect.

During the course of an equity receivership, a debtor’s

employee started a fire that caused damage to neighboring 

owners, who filed tort claims. Under the law then in force, 

the debts of a receivership were handled the same as debts 

of a debtor in bankruptcy (once the formal proceeding began), so the Justices treated the tort claims as debts incurred 

during the bankruptcy—just as Chicago fined Steenes and 

Dudley during the course of their bankruptcy. The Supreme 

Court observed that the norm is to treat as administrative 

expenses all costs of operating an estate in bankruptcy. The 

trustee representing other creditors argued that tort claims 

should be treated differently and that only voluntarily incurred debts should be deemed administrative expenses.

The trustee contends that the relevant statutory objectives are 

(1) to facilitate rehabilitation of insolvent businesses and (2) to 

preserve a maximum of assets for distribution among the general creditors should the arrangement fail. He therefore argues 

that first priority as “necessary” expenses should be given only 

to those expenditures without which the insolvent business 

could not be carried on. For example, the trustee would allow 

first priority to contracts entered into by the receiver because 

suppliers, employees, landlords, and the like would not enter into dealings with a debtor in possession or a receiver of an insolvent business unless priority is allowed. The trustee would exclude all negligence claims, on the theory that first priority for 
No. 17-3630 5

them is not necessary to encourage third parties to deal with an 

insolvent business, that first priority would reduce the amount 

available for the general creditors, and that first priority would 

discourage general creditors from accepting arrangements.

391 U.S. at 476–77. The trustee in Reading advanced the same 

basic line as the one the bankruptcy and district judges 

adopted here. But the Supreme Court held that claims derived from torts commifed during a bankruptcy must be 

treated the same as debts voluntarily incurred. What is true 

of involuntary debts for torts is equally true of involuntary 

debts amassed while operating a car.

When concluding that Reading does not control, the district judge gave two principal reasons.

The first is that, for a business, liability in tort is just one 

of many operating costs, similar to labor and materials. Requiring a debtor to pay for its torts preserves an incentive to 

conduct the business safely, see In re Resource Technology 

Corp., 662 F.3d 472, 476–77 (7th Cir. 2011), while fines are not

necessary. 281 F. Supp. 3d at 705–06. This overlooks the 

point that maintaining an automobile is necessary to the success of a Chapter 13 bankruptcy. A debtor who failed to pay 

for insurance or gasoline could not continue using the car to 

commute to work. The question then becomes whether voluntary creditors (such as private parking lots) must be paid, 

while involuntary ones (such as cities whose streets may be 

used for parking) are not. Our earlier decision concludes that 

debtors who need cars must pay their involuntary creditors—including cities as well as, say, pedestrians run down 

by reckless driving—along with the suppliers of gasoline 

and insurance.
6 No. 17-3630

The district judge’s second reason is that a natural person 

is entitled to a “fresh start” in a way that a business debtor is 

not. 281 F. Supp. 3d at 707–08. That’s true enough, but the 

fresh start is dated when the bankruptcy begins. Prebankruptcy debts may be wrifen down or discharged, under Chapter 13, to the extent they cannot be paid from current assets and income. But this does not mean that debtors 

are entitled to pay less than the expenses freshly incurred. A 

debtor making payments under a Chapter 13 plan is not entitled to buy gasoline at 50% of the price charged to other 

persons or to get gas on credit (promising to pay after the 

Chapter 13 plan ends) while others must pay when the gas is 

delivered. Similarly a debtor making payments under a 

Chapter 13 plan is not entitled to park for free on city streets, 

when others must pay in advance or pay fines for parking in 

forbidden places or at forbidden times.

An argument that it would be a good idea to distinguish 

between business and personal debtors is one properly addressed to Congress. Chapter 13 does treat personal debtors 

differently from business debtors in some respects, but the 

rules for identifying administrative expenses and sefing 

priorities for payment are in Chapter 5, which applies to 

personal and business debtors alike. 11 U.S.C. §103(a). The 

district judge and the litigants have not identified any textual basis for differentiating the treatment of involuntary debts 

that arise during the course of business versus personal 

bankruptcies.

This is hardly the first time that a unit of government has 

contended that fines for civil offenses commifed after the 

commencement of the bankruptcy must be treated as administrative expenses. Many courts of appeals have held that 
No. 17-3630 7

they must be so treated. See, e.g., In re Munce’s Superior Petroleum Products, Inc., 736 F.3d 567, 571–73 (1st Cir. 2013) (fine 

for contempt of court); In re Al Copeland Enterprises, Inc., 991 

F.2d 233, 240 (5th Cir. 1993) (penalty interest for failing to 

remit trust-fund taxes); In re N.P. Mining Co., 963 F.2d 1449, 

1458 (11th Cir. 1992) (civil penalties for post-petition mining 

activities). We have not found any contrary decision.

Steenes and Dudley contend that 11 U.S.C. §1305 supplies the exclusive provision for payment of post-filing liabilities under Chapter 13. This statute reads:

(a) A proof of claim may be filed by any entity that holds a claim 

against the debtor—

(1) for taxes that become payable to a governmental unit 

while the case is pending; or

(2) that is a consumer debt, that arises after the date of the 

order for relief under this chapter, and that is for property or 

services necessary for the debtor’s performance under the 

plan.

(b) Except as provided in subsection (c) of this section, a claim 

filed under subsection (a) of this section shall be allowed or disallowed under section 502 of this title, but shall be determined as 

of the date such claim arises, and shall be allowed under section 

502(a), 502(b), or 502(c) of this title, or disallowed under section 

502(d) or 502(e) of this title, the same as if such claim had arisen 

before the date of the filing of the petition.

(c) A claim filed under subsection (a)(2) of this section shall be 

disallowed if the holder of such claim knew or should have 

known that prior approval by the trustee of the debtor’s incurring the obligation was practicable and was not obtained.

Section 1305(a) allows a city to file a proof of claim for unpaid taxes—which means, Steenes and Dudley contend, that 

a city may not recover unpaid fines and penalties. Otherwise 

§1305(a)(1) would be surplusage, the argument runs, and it 
8 No. 17-3630

must not be read that way. See Hall v. United States, 566 U.S. 

506, 517 (2012).

This is a non-sequitur. Section 1305 does not mention 

administrative expenses, as defined in §503, or change the 

priority of payment laid out in §507. It does not read like an 

exemption from payment, so that a debtor under Chapter 13 

who hired a chauffeur would not ever need to pay the employee’s wages. (After all, §1305 does not mention wages any 

more than it mentions fines.) To the extent §1305 bears on 

our situation, the important subsection is §1305(a)(2), which 

authorizes claims for “property or services necessary for the 

debtor’s performance under the plan.” That reference to necessity kicks us back to §503(b)(1)(A), which says that necessary expenses receive administrative priority. And, as we 

have mentioned several times, it won’t do to ask whether 

violating local law was itself “necessary”; the question is

whether operating a vehicle is necessary to earn the money 

needed to perform the Chapter 13 plan. If the answer is 

yes—and the debtors insist that cars are essential—then the 

costs of operating that necessary asset are themselves necessary. That’s why a debtor who must pay to park in private 

parking lots also must pay to park on public streets. The 

debtors have not cited any appellate decision holding or 

even suggesting that administrative expenses as defined in 

§503(b)(1)(A) are outside the scope of §1305(a)(2).

We hold that vehicular fines incurred during the course 

of a Chapter 13 bankruptcy are administrative expenses that 

must be paid promptly and in full.

REVERSED