577 B.R. 294
Bankr. N.D. Ill.2017Background
- Debtor Jennifer Robinson owned real property at 6402 S. Ingleside, Chicago, and fell behind on Cook County property taxes; U.S. Bank purchased the tax certificates and paid subsequent installments.
- Debtor filed a chapter 13 case one day before U.S. Bank alleges the statutory redemption period expired; that first case was dismissed and she filed the present chapter 13 case nine years later (Petition Date April 20, 2017).
- No tax deed had been issued or recorded for the Property when the present petition was filed; Tax Purchaser (U.S. Bank and Axert) moved eleven days after filing to modify/terminate the automatic stay to proceed to obtain a tax deed.
- Tax Purchaser’s sole argument: prepetition expiration of the statutory redemption period bars the Debtor from treating the tax purchaser’s claim or the Property in a chapter 13 plan and thus stay relief is warranted.
- Debtor argued she may treat the tax purchaser’s claim/property under chapter 13 so long as no tax deed has been issued and recorded; she proposed a plan that treats the Tax Purchaser.
- After multiple hearings, the court concluded Seventh Circuit authority controls and denied the Tax Purchaser’s motion to modify the automatic stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether expiration of Illinois redemption period before bankruptcy filing prevents chapter 13 plan treatment of tax‑sold property | Expiration of redemption period precludes treatment of the tax purchaser’s claim/property in chapter 13 | Expiration of redemption period is not dispositive; so long as no tax deed is issued and recorded debtor may treat claim/property | Held for Debtor: expiration alone does not bar plan treatment when no tax deed has been issued/recorded |
| Whether tax purchaser is entitled to relief from the automatic stay to obtain a tax deed | Relief warranted because debtor’s redemption right had lapsed prepetition | Stay bars obtaining a tax deed while property/claim are being treated in chapter 13; obtaining deed would interfere with estate property | Held for Debtor: stay remains; obtaining tax deed while case pending is an act to obtain estate property and is stayed |
| When the tax purchaser’s interest is perfected against bona fide purchasers or for avoidance look‑backs | Perfection occurs at expiration of redemption period | Perfection occurs upon issuance and recording of tax deed | Held: perfection occurs at issuance/recording of tax deed (Seventh Circuit precedent governs) |
| Whether the bankruptcy case was too nascent to deny stay relief (i.e., probability of successful plan) | Tax Purchaser argued it should be able to act despite early stage | Debtor has proposed plans treating the tax purchaser; early stage favors maintaining stay | Held for Debtor: at this early stage treatment in proposed plan suffices to deny stay; Tax Purchaser may renew if circumstances change |
Key Cases Cited
- Smith v. SIPI, LLC (In re Smith), 614 F.3d 654 (7th Cir.) (pre‑deed taxbuyer holds only contingent right; debtor retains significant title until deed recorded)
- Smith v. SIPI, LLC (In re Smith), 811 F.3d 228 (7th Cir.) (Illinois tax sales do not yield reasonably equivalent value; tax purchasers may be subject to avoidance)
- LaMont v. New Jersey (In re LaMont), 740 F.3d 397 (7th Cir.) (debtor may treat tax purchaser’s lien in chapter 13 while no tax deed recorded; stay protects estate from purchaser obtaining deed)
- In re Bates, 270 B.R. 455 (Bankr. N.D. Ill.) (discusses Illinois tax sale scheme and earlier view that plan treatment required unexpired redemption period; superseded in part by Seventh Circuit decisions)
- Butner v. United States, 440 U.S. 48 (U.S. 1979) (property interests are defined by state law absent federal interest)