Court: United States Bankruptcy Court, E.D. Tennessee; April 5, 2016; Us Bankruptcy; United States Bankruptcy Court
The court grants the Plaintiff's Motion for Summary Judgment regarding the property at 1725 Mitchell Avenue in Chattanooga, Tennessee. The Plaintiff purchased the property on March 21, 2003, has occupied it since, and currently uses part of it as an office while leasing the remainder to her niece and her spouse. The Plaintiff intends to use the property as her primary residence during the case's resolution. Hamilton County acknowledges the facts presented by the Plaintiff.
On June 5, 2014, a tax sale occurred, with Mr. Ditto as the successful bidder, and a confirming decree was recorded on June 16, 2014. The Plaintiff filed for chapter 13 bankruptcy relief on June 4, 2015, with no objections to her proposed plan, which was confirmed on July 15, 2015. This plan included ongoing mortgage payments and provisions for curing mortgage defaults and paying unsecured claims.
On July 31, 2015, Chattanooga Neighborhood Enterprise, Inc. (CNE) submitted a check for $4,673.10 to redeem the property on behalf of the Plaintiff, accompanied by a statement and a letter from CNE's attorney indicating the intention to redeem the property lost in the tax sale. However, on August 27, 2015, a motion was filed in the Chancery Court to deny the redemption, claiming it was untimely.
According to Tennessee Code Annotated § 67-5-2701(a)(1), the right to redeem property lasts one year from the confirmation order of the sale. The Plaintiff argues that this redemption period was extended by the Bankruptcy Code, specifically citing 11 U.S.C. § 108(b), which allows for the extension of certain deadlines for debtors in bankruptcy if the period has not expired before filing the bankruptcy petition.
The tax sale decree is an order from a nonbankruptcy proceeding, with T.C.A. 67-5-2701(a)(1) providing a timeframe for the debtor to remedy defaults. The one-year redemption period was still valid when the plaintiff filed for bankruptcy, allowing her 60 additional days post-order for relief to redeem her property. Defendants argue that only a trustee can benefit from the extension under § 108(b) of the Bankruptcy Code. While it is agreed that the redemption period for CNE expired before it attempted to redeem on July 31, 2015, the plaintiff claims CNE acted as her agent during this process. The defendants contest the existence of such an agency, but evidence, including a cover letter and the plaintiff's affidavit, supports the claim that CNE filed for redemption on her behalf. The court emphasizes that defendants must provide evidence to dispute this claim, which they have failed to do. The main issue remains whether a chapter 13 debtor can utilize the benefits of § 108(b). Although the Supreme Court and Sixth Circuit have not ruled on this, the Second Circuit has determined that chapter 11 debtors in possession can benefit from similar provisions. However, chapter 13 debtors do not have the same extensive rights as chapter 11 debtors in possession, though they do retain certain rights to manage estate property independently of the chapter 13 trustee.
Under 11 U.S.C. § 1303 and § 1306(b), a Chapter 13 debtor retains possession of all estate property unless a confirmed plan states otherwise. The debtor has a right to redeem property sold for taxes per T.C.A. § 67-5-2701, which is considered an interest in property under Tennessee law (Marsh v. Storie). This redemption right becomes part of the bankruptcy estate upon the Chapter 13 case filing (11 U.S.C. § 541(a)(1)). As the debtor has trustee-like powers over estate property, they are entitled to the same extension of time to exercise the redemption right as a Chapter 11 debtor, as supported by case law interpreting § 108(a) of the Bankruptcy Code. Various bankruptcy court decisions affirm that Chapter 13 debtors can benefit from these extensions, particularly when the litigation serves the estate (e.g., Carpenter v. U.S. Bank; Dawson v. Thomas). Notably, the McConnell case established that a Chapter 13 debtor can pursue prepetition causes of action as property of the estate, emphasizing that the debtor possesses the rights and powers of a trustee in managing estate property. While there is limited case law on this, some courts have reached differing conclusions on the applicability of § 108 to Chapter 13 debtors.
The debtor in a Chapter 13 bankruptcy case is considered a debtor-in-possession under 11 U.S.C. 1306(b), which allows them to retain possession of all estate property unless stated otherwise in a confirmed plan. This status grants the Chapter 13 debtor the ability to sue on behalf of the estate, similar to other debtors-in-possession, although they possess only certain trustee powers. The statute aims to avoid absurd interpretations, asserting that if Chapter 13 debtors can prosecute pre-bankruptcy causes of action, they should also receive the protections of 11 U.S.C. 108. The court emphasizes that Congress intended for Chapter 13 debtors to have the same rights as trustees or debtors-in-possession in Chapters 11 and 12. The court aligns with the reasoning in McConnell regarding the applicability of 11 U.S.C. 108(a) and finds it equally applicable to extensions under 108(b). It refutes claims that Section 108(b) applies solely to trustees in Chapter 13 cases, noting that the case law cited (Federal Land Bank v. Glenn) does not undermine the position that Section 108(b) can enhance the debtor's rights.
The district court in *Dunlap v. Cash America Pawn* clarified that the automatic stay under 11 U.S.C. § 362 does not pause the statutory redemption period for property. Consequently, 11 U.S.C. § 108 provides the only protection for the estate regarding property redemption. The court noted that while a trustee has 60 days post-petition to redeem pawned goods, this was considered dicta since no redemption occurred within that timeframe. It argued that denying a Chapter 13 debtor the benefits of § 108(b) would be illogical, as the debtor holds exclusive rights to property of the estate, akin to a trustee's rights in Chapter 11 cases. The court affirmed that § 108(b) extends the redemption time for Chapter 13 debtors, as Congress intended its application in such cases. This aligns with appellate decisions stating that the rights of a debtor mirror those of a trustee in Chapter 13. The court ruled that the plaintiff had the right to redeem the property through her agent, as the redemption occurred within the necessary period. The defendants did not contest the method or amount of the redemption, nor did they substantiate their claims regarding possession attempts due to the automatic stay. Several appellate courts have also recognized the applicability of § 108(b) to Chapter 13 debtors.
Section 1107(a) grants a debtor in possession the same rights and powers as a trustee, excluding compensation rights under section 330. The precedent set in Glenn has been applied beyond mortgage foreclosure to tax sales, as seen in Tabor Enters. Inc. v. State. In this case, the plaintiffs' Chapter 13 plan did not address the payment of taxes or the revesting of legal title, relying instead on tax redemption through direct payment. Consequently, the defendants lacked grounds to oppose the plan's confirmation. Additionally, there were no objections from any party regarding the treatment of CNE's claim or the benefit of the property to the estate. The court highlights that the plaintiff earns income from the property, which helps fulfill her plan obligations, and plans to reside there, underscoring the property's importance to her reorganization efforts.
