In re Gonzalez
550 B.R. 711
| Bankr. E.D. Pa. | 2016Background
- Debtor Catherine Gonzalez filed Chapter 13 while within Pennsylvania’s 9‑month statutory redemption period following a sheriff’s deed conveying her former residence to Jian Zhu Lin after a tax sale.
- Lin purchased the property at the tax sale for $70,000; the City’s tax claim was paid from that bid; SRP holds a mortgage on the property.
- Debtor’s schedules listed the property and proposed plans that (eventually) treat a $70,000 claim for Lin as a secured claim payable through the Chapter 13 plan.
- Debtor filed a secured proof of claim on Lin’s behalf for $70,000; Lin and the City objected to plan confirmation.
- Core disputed legal questions: whether the redemption amount constitutes a bankruptcy “claim” that can be treated/modified in Chapter 13, and whether the Debtor timely invoked the redemption right.
Issues
| Issue | Debtor’s Argument | Objectors’ Argument (Lin/City) | Held |
|---|---|---|---|
| Whether the statutory Redemption Amount is a bankruptcy “claim” (secured) subject to modification under 11 U.S.C. §§1322(b)(2) & 1325(a)(5) | Redemption amount is a secured claim because the owner retains substantial equitable interests post‑sale; payment avoids forfeiture of those interests, akin to a secured creditor’s claim | No ‘right to payment’ exists; redemption right is an asset/option under state law, not an obligation that creates a bankruptcy claim | Held: The Redemption Amount is a bankruptcy “claim” and may be treated/modified in a Chapter 13 plan |
| Whether a Chapter 13 plan can effect redemption (i.e., use plan payments instead of lump‑sum state redemption procedure) | Chapter 13 can govern treatment of an allowed secured claim; bankruptcy law (§1322/§1325) controls payment terms once claim exists | Redemption must follow state statutory process and time/deadline expectations (lump sum, state court petition) | Held: A Chapter 13 plan may effect redemption by treating the purchaser’s claim as an allowed secured claim payable under the Code |
| Whether the City has standing to object to confirmation (City’s tax claim was paid prepetition) | N/A (City asserted interest in preserving tax sale process) | City argues it is harmed by permitting plan redemptions that lengthen redemption process and reduce buyer protections | Held: City lacks standing to object because its prepetition claim was satisfied and any alleged harm is indirect |
| Whether Debtor’s attempt to redeem was timely (did she invoke redemption before statutory deadline) | Filing the bankruptcy petition and initial plan (even if imperfectly pled) amounted to timely invocation; plan filings can be treated as equivalent to a timely redemption petition and can be amended | Debtor failed to timely invoke state redemption procedure and waited >9 months to propose a plan naming Lin; initial plan did not clearly seek redemption from Lin | Held: Debtor’s filings were functionally equivalent to a timely invocation; attempt to redeem was not untimely |
Key Cases Cited
- Butner v. United States, 440 U.S. 48 (U.S. 1979) (state law defines property interests in bankruptcy)
- Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (U.S. 1982) (possession is a core property right)
- In re Roach, 824 F.2d 1370 (3d Cir. 1987) (discusses termination timing of cure rights in Chapter 13)
- In re Connors, 497 F.3d 314 (3d Cir. 2007) (foreclosure sale timing for cure rights reference)
- In re Richter, 525 B.R. 735 (Bankr. C.D. Cal. 2015) (holds redemption right is estate asset/option, not a claim)
- In re Francis, 489 B.R. 262 (Bankr. N.D. Ga. 2013) (concludes purchaser holds claim for debtor’s equitable interest)
- In re Hammond, 420 B.R. 633 (Bankr. W.D. Pa. 2009) (discusses defeasible title and purchaser’s limited interests during redemption)
- In re Pittman, 549 B.R. 614 (Bankr. E.D. Pa. 2016) (analyzes owner’s retained rights during Pennsylvania redemption period)