MEMORANDUM OPINION AND ORDER
This case comes before the Court on Appellant Gan B, LLC’s appeal from a decision of the Bankruptcy Court denying its Motion to Lift the Automatic Stay. For the reasons stated herein, the judgment of the Bankruptcy Court is affirmed and relief from the stay is denied.
I. BACKGROUND
A. Legal Background
1. The Illinois Tax Sale Process
The Illinois Tax Code provides that on January 1 of each year, a lien attaches to all non-exempt real property securing the payment of that year’s taxes levied on that property. 35 Ill. Comp. Stat. 200/21-75. This lien has priority over all others, even those prior in time. Ibid. Where property taxes go unpaid, the county may bring an action to foreclose the lien and seek a judgment and order of sale in Illinois circuit court. Ibid.; 35 Ill. Comp. Stat. 200/21-150 through 21-185. If a judgment is rendered against such a property, the property owner is then given an opportunity to pay the delinquent taxes and interest up to and including one business day before the sale. 35 Ill. Comp. Stat. 200/21-165. If the taxes go unpaid still, then the county collector may proceed with the tax sale. 35 Ill. Comp, Stat. 200/21-205.
The sale occurs at an auction in which potential buyers offer to pay the delinquent taxes due on the day of the tax sale, and they do so by bidding on the lowest amount of penalty premium that they will accept to redeem the property within the prescribed redemption period. 35 Ill. Comp. Stat. 200/21-215 (2009). The winning bidder pays to the county the outstanding taxes on the property and receives in return a certificate of purchase. 35 Ill. Comp. Stat. 200/21-240, 21-75; see also, Application of Rosewell,
The original property owner has between two and three years to redeem the property, depending on whether the property is a residence and whether the tax purchaser extends the statutory period. 35 Ill. Comp. Stat. 200/21-345, 21-250, 21-385,21-389. Redemption requires payment of the unpaid taxes plus the penalty percentage, subsequent taxes paid by the tax purchaser plus 12 percent interest per an-num, and various costs and fees permitted by statute. 35 Ill. Comp. Stat. 200/21-355. (If the tax purchaser pays delinquent taxes subsequent to the sale, then the redemp
Before expiration of the redemption period, the tax purchaser holds only an interest in obtaining a tax deed. It is not a future interest in property but a “non-recourse tax lien”—“a mere species of personal property [that] does not give its purchaser any equity or title to the property,” only “those rights which the statutory framework creates.” LaMont,
2. Treatment of Tax Purchasers in Bankruptcy
The holder of a certificate of purchase has the right to receive the redemption amount, which gives the tax purchaser a “claim” in the event that the property owner files for bankruptcy before expiration of the redemption period. LaMont,
This does not mean that a certificate holder facing an onerous confirmed plan lacks recourse. If the property owner files for bankruptcy after the tax purchaser
3. Tax Purchasers and the Automatic Stay
Once a debtor files a petition in bankruptcy, an automatic stay takes effect and precludes certain actions against the debt- or or property of his estate. 11 U.S.C. § 362. Along with providing the debtor with a breathing spell, the stay prevents creditors from cutting in line to take property that will be treated in the plan. For example, the stay bars a tax purchaser’s attempt to enforce its lien by petitioning for an order to issue a tax deed. See, e.g., LaMont,
Generally, the bankruptcy statute requires that a creditor be granted relief from the automatic stay “for cause, including the lack -of adequate protection of an interest in property.” 11 U.S.C. § 362(d)(1). However, a tax purchaser may not seek relief for cause based purely on the running of the redemption period, at least where that period did not expire before the bankruptcy filing and the tax purchaser’s secured claim is treated in the debtor’s Chapter 13 plan. See, LaMont,
In sum, where a debtor files for bankruptcy after a tax sale but before the end of the redemption period, subsequent expiration of the redemption period tolls the tax purchaser’s time to obtain a tax deed during the pendency of the automatic stay. But it does not affect the validity of the plan treating the purchaser’s claim, nor does it necessitate modifying the stay—so long as the debtors remain compliant with the plan.
B. Factual Background
This appeal stems from the Chapter 13 bankruptcy of Jerome Sims, Jr. (“Sims”). Sims and his wife, Tammy, had four children together, and Tammy also brought to the marriage a child from a prior union. At relevant times before her death on October 27, 2014, Tammy was the sole owner of a parcel of real estate located at 8738 South
After Tammy died intestate, a probate action commenced in June of 2015; Sims was appointed independent administrator. During those proceedings, the Property was appraised at the modest value of $27,000.00. Upon taking possession of the Property and winding down Tammy’s affairs, Sims became aware of the real estate tax delinquencies. As a result, on February 11, 2016, Sims filed the underlying petition for Chapter 13 bankruptcy.
On Schedule A/B of his bankruptcy petition, Sims did not claim any ownership interest in real estate. On Schedule D, Sims listed the Cook County Treasurer’s Office as a secured creditor for property tax arrearages, which he calculated at $9,080.00. On Schedule J, Sims listed $900.00 in repair and maintenance expenses associated with the Property but did not declare any real estate taxes or property insurance expenses. His original bankruptcy plan mandated that his $358.00 in excess income go to pay creditors for a 60-month period, including the Cook County Treasurer.
On February 23, 2016, Sims filed a motion to extend the automatic stay and attached two documents: an affidavit and an “estimate of redemption” prepared by Cook County. In the affidavit, Sims averred that he, his wife’s child, and the couple’s four children together were “set to inherit a home,” that delinquent real estate taxes were due, and that he was concerned about the prospect of a tax sale if the automatic stay were not extended. The “estimate of redemption,” which was prepared before the bankruptcy filing, indicated that Gan had purchased the unpaid real estate taxes. The Bankruptcy Court extended the automatic stay.
On April 29, 2016, Sims filed an amended Schedule D. In the amended schedule, Sims asserted that the previously disclosed $9,080.00 in sold unpaid real estate taxes were in fact owed to the Cook County Clerk and that the Cook County Treasurer was owed $936.00 in unsold back property taxes coming due in the first months of 2016. The -amended schedule for the first time listed Gan as a creditor with respect to the sold unpaid real estate taxes due the Cook County Clerk. That same day, Sims also amended his original plan to indicate that the Cook County Clerk would be paid for property taxes due in 2012-2014 and the Cook County Treasurer for the unpaid 2015 property taxes. (As noted above, Gan had in fact paid all those taxes.) The amended plan was confirmed on May 16, 2016. Gan lodged no objection.
In August 2016, Sims filed a motion in probate to extinguish the interests of his and Tammy’s minor children in the Property. On August 30, 2016, an agreed probate orc|er transferred Í00 percent of the interest | in the Property to Sims. A deed reflecting the same was filed with the Cook County Recorder of Deeds on September 8, 2016.
On August 22, 2016, the Bankruptcy Trustee presented a motion to dismiss based on Sims’s failure to make plan payments. After multiple continuances of the matter, Sims presented a motion to defer certain plan arrearages. That motion indicated that payroll deductions did not commence on time and that the plan arrearag-es, if deferred to the end of the plan, would be paid through payroll deductions. Over
About four weeks before Sims filed his bankruptcy petition, on January 19, 2016, Gan had filed a tax deed petition in Cook County circuit court. Gan’s petition noted that the redemption period for the delinquent real estate taxes would expire on July 11, 2016. That day came and went without any redemption on the part of Sims. In order to proceed with obtaining a tax deed on the Property, Gan filed a motion in the Bankruptcy Court to lift the automatic stay. It argued that its interest in the Property was not adequately protected because, first, Sims had failed to pay post-petition real estate taxes, forcing Gan to pay them to protect its interest, and second, Sims was refusing to obtain and fund hazard insurance on the Property. Gan also contended that the Property was not subject to a claim in bankruptcy— and thus not affected by the automatic stay—because Sims did not have title to the Property, only an uncertain and un-vested right to inherit it, when he filed his bankruptcy petition. Sims, on the other hand, opposed lifting the stay on the basis that his failure to pay post-petition real estate taxes and maintain property insurance did not amount to inadequate protection of Gan’s interest. He further claimed that his interest in the Property vested immediately upon Tammy’s death—that is, before he filed for bankruptcy—such that the Property was properly included in the Chapter 13 estate.
The Bankruptcy Court declined to lift the automatic stay, holding that Gan’s interest was adequately protected and that, pursuant to the Illinois Surviving Spouse Statute, Sims had an (equitable) inheritance interest in one-half of the Property at the time he filed the petition. Thus, the Property was rightly included in Sims’s bankrupt estate such that Gan’s secured tax claim was amenable to treatment in the confirmed bankruptcy plan. The court also noted that, to the extent Gan felt aggrieved, it could petition the circuit court to declare the tax sale a “sale in error,” entitling Gan to reimbursement of funds paid plus interest. Gan then filed this appeal.
II. ANALYSIS
A. Legal Standard
The Bankruptcy Code (“the Code”) entrusts bankruptcy courts with discretion when granting a creditor relief from the automatic stay. See, 11 U.S.C. § 362(d)(1) (requiring the court to grant relief only after making a “for cause” finding); Matter of Holtkamp,
B. Sims’s Interest in the Property
Gan argues that the Bankruptcy Court’s refusal to lift the automatic stay was predicated on the erroneous legal conclusion that Sims owned an interest in the Property sufficient for its inclusion in the bankrupt estate at the time of filing of his petition. Gan posits instead that Sims did not have a concrete ownership interest in the Property until after the redemption date. Invoking undisputed facts—such as Tammy’s death without a will, the Property’s envelopment in probate proceedings, and Sims’s acquisition of a deed to the
Section 541(a) of the Code provides for the creation of an estate upon commencement of a case under Section 301, 302, or 303.11 U.S.C. § 541(a). Under the statute, the estate is comprised of property “wherever located and by whomever held,” provided that it falls within various enumerated categories. Two of these categories are relevant here. First, subsection (a)(1) mandates inclusion in the bankrupt estate of “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). The reach of this provision is broad, including “every conceivable interest of the debtor, future, nonpossessory, speculative, and derivative” that the debtor held on the petition date. In re Yonikus,
(5) Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date—(A) by bequest, devise, or inheritance....
11 U.S.C. ' § 541(a)(5). (According to Black’s Law Dictionary, “inheritance” includes “[p]roperty received from an ancestor under the laws of intestacy.” Black’s Law Dictionary 903 (10th ed. 2014).) This second category of estate property is also known as “after-acquired property.” While Section 541 determines the scope of the estate’s property, state law usually determines the nature and extent of a debtor’s interests as of the petition date. Butner v. U.S.,
The parties do not disagree on the relevant facts, and Gan concedes that, had Tammy devised the Property to Sims, it would have been rightly included within the bankrupt estate at the time of the petition’s filing. Matter of Chenoweth,
Gan seeks to distinguish Chenoweth and related bankruptcy cases purely on the grounds that they all involved property devised by will, not inherited through intestacy. Citing no legal authority, Gan contends that the Bankruptcy Court committed legal error in finding “no reason to
Gan’s argument rests on unsound bedrock. Illinois law does not distinguish between when interests in devised property vest in devisees and when interests in intestate property vest in heirs: both occur upon the decedent’s death. See, e.g., Hagney v. Lopeman,
Relatedly, probate proceedings do not create (but only vindicate) legal entitlements, and so their pendency does not affect whether an interest in property otherwise falls within a bankrupt estate. Illinois “courts have always recognized the marked distinction between the vesting of an estate and the right to enjoy possession of that estate. The latter is effected by probate proceedings, while the former is not.” In re Estate of Knight,
Nor is it damning, as Gan suggests, that Sims did not list on Schedule A/B of his petition any interest in real estate. In moving to extend the automatic stay shortly after filing the petition, Sims disclosed via affidavit his own inheritance interest and that of Tammy’s children in the Property. He later filed amendments listing Gan as an interested party and the municipal real estate tax collectors as creditors. While the Bankruptcy Court noted that confirmation of the plan was inadvisably hasty, Gan had 14 days’ notice yet did not object to the plan, did not subsequently ask the Bankruptcy Court to revoke it pursuant to 11 U.S.C. § 1330, and did not seek leave to file a proof of claim. Gan’s appeal cannot rest on such procedural faits accomplis, which go to the plan’s validity and not the Bankruptcy Court’s refusal to lift the stay for Gan to pursue a tax deed.
Ergo, the Bankruptcy Court did not commit legal error in applying the Chenoweth rationale to the case at bar. Upon Tammy’s intestate death on October 27, 2014, Sims obtained via the Illinois
C. Adequate Protection
Gan’s other basis for appealing the Bankruptcy Court’s denial of its Motion to Lift the Automatic Stay is a lack of adequate protection. Gan claims that its secured claim on the Property is not adequately protected because of Sims’s failure to pay post-petition real estate taxes and maintain insurance on the Property. Gan argues that the former amounts to inadequate protection of its secured claim because a potential subsequent purchaser of the Property’s outstanding tax debt would have a superior hen. With respect to Sims’s failure to carry insurance, Gan invokes the specter of catastrophic damage to the Property. Sims ripostes that he need not pay post-petition real estate taxes or maintain property insurance because Gan has no security agreement or other contract with Sims.
The Code provides for relief from the automatic stay “for cause, including the lack of adequate protection of an interest in property.” 11 U.S.C. § 362(d)(1). Because secured creditors cannot repossess or foreclose on their collateral while the automatic stay is in effect, “adequate protection” is intended to protect, during the pendency of the bankruptcy case, against loss in value of the secured creditor’s interest in property of the estate. United Sav. Ass’n of Texas v. Timbers of Inwood Forest Asscs., Ltd.,
First, the Court acknowledges a dearth of authority germane to Gan’s argument. Gan cites exclusively cases involving a debtor’s obligation to a secured mortgage-holder or under a security agreement. See, e.g., In re Greives,
Similarly, the Court’s own search of adequate protection cases vis-á-vis real estate taxes and insurance coverage turned up only mortgagor-mortgagee and other security agreement scenarios. See, e.g., In re Doug Wilson Ins. Agency, Inc.,
The Court did find one exception to the foregoing, In re Scott,
Second, the risk of any tax buyer interceding to purchase post-petition real estate tax arrearages is illusory. Tax sales occurring “when the automatic stay is in effect ... are void ab initio.” In re Application of Cnty. Collector for Delinquent Taxes,
The more cognizable risk, unmentioned by Gan and the Scott court, is that the county acquires a superior tax lien on post-2015 accruing tax arrearages. But, as the Bankruptcy Court noted—relying on post-Scott cases such as LaMont and Ro-mious—Gan is adequately protected from any such injury by the Illinois property tax code’s sale-in-error provision: it can petition the circuit court to declare its tax purchase a “sale in error” and demand refund of “the amount paid” “subsequent to the tax sale and prior to the issuance of the tax deed.” 35 Ill. Comp. Stat. 200/21-310(b)(1) & (d); LaMont,
With respect to Sims’s failure to carry insurance on the Property, the Court’s search turned up no cases supporting the proposition that a tax purchaser is entitled to adequate protection in the form of the debtor’s maintenance of property insurance. For many of the same reasons discussed above, it was not legal error for the Bankruptcy Court to reject Gan’s attempt to impose a property insurance obligation on Sims in favor of the proposition, enjoying recent support in this Circuit, that a tax purchaser is generally adequately protected by the sale-in-error doctrine. Fundamentally, the interest in underlying property arising from a certificate of purchase is a unique creature, enjoying only the rights granted under the statutory scheme. LaMont,
Attempting to fit Gan’s round claim into the Code’s square hole, the Bankruptcy Court analyzed 11 U.S.C. § 1326(a)(4), which under certain conditions obligates a debtor to carry insurance to protect a secured creditor’s interest:
Not later than 60 days after the date of filing of a case under this chapter, a debtor retaining possession of personal property subject to a lease or seeming a claim attributable in whole or in part to the purchase price of such property shall provide the lessor or secured creditor reasonable evidence of the maintenance of any required insurance coverage with respect to the use or ownership of such property and continue to do so for as long as the debtor retains possession of such property.
11 U.S.C. § 1326(a)(4) (emphasis added). This Court is not convinced that § 1326(a)(4) is even applicable to Gan’s argument, and there would be no dice even if it were (as the Bankruptcy Court assumed). As an initial matter, the property Sims is “retaining possession of’ is real estate, not Gan’s personal property, even if he possesses the Property subject to Gan’s secured tax lien that itself is a “species of personal property.” LaMont,
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Finally, the Court notes an alternative means of affirming the Bankruptcy Court’s ruling. In deciding whether to grant relief from an automatic stay “for cause”—and adequate protection is the first example of “cause” the Code provides—three favors guide a court’s decision. The Seventh Circuit in Matter of Fernstrom Storage and Van Co.,
Based on the undisputed facts the Bankruptcy Court found, Femstrom militates in favor of denying Gan’s motion. First, Gan’s attempt to pursue a tax deed during the pendency of the stay would prejudice the bankrupt estate, because it would be a suit against the predominant piece of estate property. (See, Section III. B, supra.) The situation is not akin to one where a creditor seeks purely a declaration of liability as a predicate to recovering from insurers, sureties, or guarantors. Fernstrom,
Second, the hardship to Sims outweighs any hardship to Gan, because the latter may simply pursue a sale-in-error declaration if it is denied relief, whereas the former must forfeit his residence if Gan is granted relief from the stay and successfully obtains a tax deed. A sale in error would allow Gan to recoup the funds it outlaid on the Property’s tax arrearages; Sims, on the other hand, has no way to recoup his investment in maintaining and repairing the Property. Also worth noting is that the situation here does not involve non-bankruptcy litigation at an “advanced stage,” meaning that maintenance of the stay does not force Gan to write off significant litigation expenses. Fernstrom,
Even if, under the third Femstrom factor, Gan has a greater probability of prevailing in its petition for a tax deed than Sims or the bankrupt estate does in opposing, the first two factors nonetheless significantly favor maintaining the stay. Therefore, as an alternative to affirming the Bankruptcy Court’s finding of adequate protection, the Court upholds its denial of Gan’s requested “for cause” relief based on Femstrom balancing.
III. CONCLUSION
The Bankruptcy Court committed no legal error in finding that the Property comprised part of the bankrupt estate at the time Sims filed his Chapter 13 petition, because he inherited an equitable interest in the Property upon the prior intestate death of his wife, Gan thus has a secured claim on the Property capable of treatment
For the reasons stated herein, the Court affirms the decision of the Bankruptcy Court denying Gan’s Motion to Lift the Automatic Stay.
IT IS SO ORDERED.