JACK B. SCHMETTERER, Bankruptcy Judge.
Debtor Thomas Thompson ("
Creditor asserts an interest in the property known as 619 N. 4th Ave., Maywood, IL ("
Because Debtor did not provide notice of the plan or bar date to Creditor, Debtor's original Chapter 13 Plan, which did not account for Creditor's claim, was confirmed. [Dkt. No. 36]. An Order was later entered vacating confirmation of that Plan. [Dkt. No. 47]. Creditor then filed a Proof of Claim for $194,000.00, consisting of $27,055.26 secured by its certificate of purchase (the "
Debtor then filed an amended Plan and an Objection to Creditor's Proof of Claim. [Dkt. Nos. 51 & 67]. Creditor filed a Motion to Annul the Automatic Stay and an Objection to the Amended Plan. [Dkt. Nos. 40 & 55]. After evidentiary hearings were held, Orders were entered:
Upon the ruling that Debtor's Objection to its Proof of Claim was overruled, Creditor then renewed its Objection to the amended Plan as the amended Plan only listed the Secured Tax Portion at 12% interest payable to Creditor and did not treat the Unsecured Portion. [Dkt. No. 84]. An Order was entered sustaining Creditor's Objection. [Dkt. No. 86]. Afterwards, Debtor filed the present, December 4, 2019, Amended Plan (the "
Subject matter jurisdiction lies under 28 U.S.C. § 1334. The district court may refer bankruptcy proceedings to a bankruptcy judge under 28 U.S.C. § 157 and 28 U.S.C. § 1334, and this proceeding was thereby referred here by Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. Venue lies under 28 U.S.C. § 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B), and (L).
In his Motion to Redeem, Debtor argues that where a Chapter 13 case is filed before the expiration of the redemption period, the debtor/taxpayer has additional time to pay the delinquent taxes through the Chapter 13 Plan, even after the expiration of the redemption period, citing In re LaMont. 740 F.3d 397 (7th Cir. 2014). Debtor also asserts that the claim/lien that the tax purchaser asserts is contingent upon the debtor owing the Cook County Clerk, and upon payment of the taxes by the debtor to the Cook County Clerk, any claim that the tax purchaser has is disallowed. Accordingly, Debtor argues, once the taxes of the Secured Tax Portion is paid and redeemed, the Unsecured Portion should be disallowed.
Debtor's argument misapplies LaMont. In LaMont, the Seventh Circuit held that when a Chapter 13 plan is filed prior to the expiration of the redemption period, under 11 U.S.C. § 1322(b)(2), a tax purchaser's claim may be treated and modified under a Chapter 13 plan. Id. at 400. Therefore, Debtor's claims that the Secured Tax Portion of Creditor's claim may be treated in his Chapter 13 Plan is correct (and which Creditor does not dispute).
However, Debtor's argument that the Unsecured Portion is contingent upon the Secured Tax Portion still owing, and thereby which can be extinguished upon payment of the secured portion to the Cook County Clerk even after the redemption period has passed, is without basis. As specifically stated by the Seventh Circuit in LaMont, "before the redemption period has expired, a property subject to a Certificate of Purchase still belongs to the delinquent taxpayer, legally and equitably," but after the redemption period passes, "the taxpayer cannot redeem the property." 740 F.3d at 401, 406. Unlike what Debtor is implying, the automatic stay provision of 11 U.S.C. § 362(a) does not toll the running of the redemption period. See Goldberg v. Tynan, 773 F.2d 177, 179 (7th Cir. 1985); LaMont, 740 F.3d at 410 ("[O]ur holding does not toll the redemption period [during bankruptcy]. The redemption period expires when it expires.").
In this case, the redemption period expired on March 11, 2019. Debtor did not redeem before the period ran. Debtor can no longer redeem, except with Creditor's agreement to extend the period of redemption (which Creditor has stated it will not agree to here). See 35 ILCS 200/21-385.
In his Motion to Pay Cook County Clerk, Debtor argues that the proper party to receive the Secured Tax Portion is the Cook County Clerk. Additionally, Debtor states that because the Cook County Clerk will not accept payments of taxes from the Chapter 13 Trustee without an order, Debtor requests an order allowing the Clerk to accept the payment directly from himself. The Cook County Clerk is not a party to this proceeding, but Debtor seeks to have it bound by such order here anyway.
Debtor provides no authority demonstrating that the Cook County Clerk ought to be paid directly instead of Creditor. It is undisputed that Creditor purchased the taxes assessed to Debtor's Property and obtained a Certificate of Purchase. Debtor did not, and does not, dispute the validity or the amount of the Certificate of Purchase. Debtor's argument seems to be based on the fact that when bankruptcy is not involved, under Illinois law, a tax purchaser has no direct right to payment from the taxpayer but rather an indirect right to payment mediated by the county. Id. at 406. But, in terms of bankruptcy law, because the tax purchaser holds a right to: (1) payment from the property of the taxpayer; and (2) the county's equitable remedy against the property, the tax purchaser holds a claim against the debtors that may be treated in bankruptcy. Id. at 408-09. Therefore, Creditor is the holder of the claim and therefore has a secured in rem claim against Debtor's Property. See LaMont, 740 F.3d at 407 (holder of certificate of purchase has a secured claim against the property since the tax purchaser has a right to payment from the proceeds if the property is redeemed). In contrast, the Cook County Clerk's office merely holds a contingent proof of claim for the sold taxes (on a potential declaration of a sale in error or if the state court finds that the statutory requirements for a tax deed are not met). Accordingly, the proper party to be paid the Secured Tax Portion here would be Creditor, the tax purchaser.
Creditor argues that the Present Plan is unconfirmable as the Present Plan does not properly treat its claim but instead attempts to deny its Proof of Claim. Debtor's Objection to Creditor's Proof of Claim was earlier overruled. Creditor holds a valid proof of claim. See In re Woodruff, 600 B.R. 616, 620 (Bankr. N.D. Ill. 2019) (prepetition tax purchaser holds a perfected in rem claim against the property for the statutory redemption amount as well as a contingent, unperfected in rem claim for the fair market value of the property minus the secured redemption claim amount). Debtor's Present Plan is based on his Motion to Redeem and Motion to Pay Cook County which are both without merit. Accordingly, the Present Plan, which calls for the disallowance of Creditor's Proof of Claim, is infeasible as it does not properly treat a valid proof of claim. See 11 U.S.C. § 1325(a)(4).
In its Motion to Dismiss, Creditor argues that the Bankruptcy Case should be dismissed as Debtor has been unable to propose a confirmable plan in six months. Creditor points out that since Debtor's original Plan was vacated, Debtor has not filed a modified plan incorporating a valid treatment of its claim. Accordingly, Creditor argues that dismissal is warranted since Debtor has obtained the protection of the automatic stay for that time period and has failed to promptly obtain confirmation and make payments to creditor as required.
A Chapter 13 petition may be dismissed for "unreasonable delay by the debtor that is prejudicial to creditors." 11 U.S.C. § 1307(c)(1). Unreasonable delay occurs when a debtor has failed to take the necessary actions to obtain plan confirmation. See Dempsey v. Carter (In re Dempsey), 2006 WL 3590191, at *8 (S.D. Ind. Dec. 8, 2006), aff'd, 247 F. App'x 21 (7th Cir. 2007). This is so because creditors are prejudiced when debtors obtain the protection of the automatic stay and fail to promptly obtain confirmation. Id.
However, it is undisputed that Debtor has attempted to obtain confirmation. When Debtor's original confirmed Plan was vacated, Debtor filed an amended Plan in two weeks. When Creditor's November 13, 2019 Objection to Confirmation was sustained on November 20, 2019, Debtor filed the Present Plan again within two weeks. Under these facts, while Debtor's (past and present) proposed Plans have not met confirmation requirements, Debtor's actions do demonstrate that he has proceeded on a timely manner, albeit on questionable legal theories. However, Debtor must accept the ruling that any proposed Plan must properly and fully treat Creditor's valid Proof of Claim. Accordingly, any further efforts by Debtor's counsel to disallow Creditor's claim and pursue arguments heretofore rejected may constitute unreasonable delay.
For the foregoing reasons, separate orders will be entered concurrently herewith:
