No. 02 C 6348 (Bankruptcy Na, 00 B 22481) Paged

11 U.S.C. § 108(b). Applying § 108(b) to the facts here, debtor had until January $, 2001, the
date marking the end of the redemption period under Tllinois law, to redeem his delinquent
taxes, Id.; 35 ILCS 200/21-350. Section 362(a) of the Bankruptcy Code, the automatic stay
provision which states that creditors may not pursue satisfaction of claims or liens while a
bankruptcy case is pending, does not toll the running of the redemption period. See Goldberg
y. Tynan, 773 F.2d 177, 179 (7th Cir. 1985). While Phoenix may have been barred from
obtaining the tax deed during the pendency of debtor’s bankruptcy case, the time period in
which debtor could redeem continued to run,

Homeside points to §§ 1322(c)(1) and 1322(b)(2) ofthe Bankruptcy Code, asserting that
these provisions allow for modification of debtor’s plan to cure the tax default regardless of
the expiration of the redemption period. Under § 1322(c)(1), a debtor has the right to cure a
default that gave rise to a lien on the debtor’s principal residence, notwithstanding applicable
non-bankruptcy law, “until the residence is sold at a foreclosure sale that is conducted in
accordance with applicable non-bankruptcy law.” 11 U.S.C. 1322(c)(1). Under section
1322(b)(2), a bankruptcy plan may “[m]odify the rights of holders of secured claims other than
a claim secured only by a security interest in real property that is the debtor’s principal
residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any
class of claims|.]” 11 U.S.C, 1322(b)(2).

The bankruptcy court found that neither of these provisions were available to debtor
since they would undermine the time limit set in § 108(b), While an issue of first impression
in the district courts, two recent decisions coming out of the bankruptcy courts show the

tension of reconciling the rights of a tax purchaser after expiration of a redemption period

with the modification provisions available in 1322. See In Re Bates, 270 B.R. 455 (Bankr,



y:

No. 02 C 6348 (Bankruptcy No. 00 B 22481) Page 3

DISCUSSION

As an initial matter, Phoenix has challenged Homeside’s standing to continue this
appeal on its own, A litigant may challenge a bankruptcy court’s order if he is a person
aggrieved by that order. In the Matter of Andreuccetti, 975 F.2d 413, 416 (7th Cir. 1992). The
person-aggrieved label will apply only to someone who can demonstrate that the order
diminishes the person’s property, increases the person’s burdens, or impairs the person’s
rights, Id, Here, Homeside has demonstrated that as a result of the bankruptcy court’s order
it lost its first-mortgage lien on the real estate, enough to qualify it as a person aggrieved, and
we accordingly consider the appeal. Indeed, as a practical matter, Homeside is the primary
real party in interest, as the record indicates that the debtor has no equity in the property.

We have jurisdiction over this appeal under 28 U.S.C, § 158 (a)(1). Acting as an
appellate court in bankruptcy proceedings, we accept the bankruptcy court’s findings of fact
unless clearly erroneous, but review conclusions of law de nove, Matter of UNR Industries,
Inc., 986 F.2d 207, 208 (7th Cir, 1993), This appeal presents two legal questions, First,
whether provisions of the Bankruptcy Code allow a debtor to cure a tax default if he files for
bankruptcy before a redemption period expires but does not redeem within the allotted time
period. Second, whether the cited modification provisions are applicable to the facts of this
case. Since we answer the first question in the negative, we do not reach the second question.

Under § 108(b) of the Bankruptcy Code,

-if applicable nonbankruptcy law, an order entered in a nonbankruptcy

proceeding, or an agreement fixes a period within which the debtor...may... cure

a default, or perform any other similar act, and such period has not expired

before the date of the filing of the petition, the trustee may only file, cure, or

perform, as the case may be, before the later of —

(1) the end of such period, including any suspension of such period occurring

on or after commencement of the case; or
(2) 60 days after the order for relief.



No, 02 C 6348 (Bankruptcy No. 00 B 22481) Page 5

N.D.LIL 2001); In Re Murray, 276 B.R. 869 (Bank, N.D. LL 2002),

The Seventh Circuit decisions in Moody y, Amoco Oil Co., 734 F.2d 1200 (7 Cir. 1984),
and Goldberg v. Tynan, supra, offer some background to the issues presented. In Moody, the
court found that the time limits of §108(b) did not limit the rights afforded by §365 to cure
executory contracts and went on tu explain that the purpose behind § 108(b) was to aid a
debtor in having time to preserve rights (pp. 1215-16), It would be anomalous, the court
reasoned, to read the provision as limiting rights afforded in other sections of the Bankruptcy
Code. Id. In Tynan, the appellants asserted a right to cure a default on their mortgage under
§ 1322(b)(5) of the Bankruptcy Code, The court found this section inapplicable since the
judgment of foreclosure had already been entered, and turned to § 108(b) to determine that
the period of redemption on the property had expired. {d. at 178-79,

In both In re Bates and In re Murray, Lilinois tax purchasers were allowed relief from

automatic stays in order to follow state court proceedings and to obtain tax deeds. In Bates,

the expiration of the redemption period occurred prior to the bankruptcy proceeding, and the
court found that there was no potential for claim treatment in the filed bankruptcy, At 469-
470. In lengthy dicta, however, the court explained that if the redemption period had not
expired before the filing of the bankruptcy petition, the tax purchaser’s claim could be
modified under § 1322(b)(2), regardless of whether the § 108(b) redemption period expired.
Id, at 466-467.

Murray disagrees with the dicta in Bates, holding that a debtor who had filed for
bankruptcy before the expiration of a delinquent tax redemption period could not modify a
plan after the time limit set in § 108(b) expired (Murray, pp. 875-76). The court reasoned that

allowing the modification rights afforded in § 1322(b)(2) te be invoked after the expiration of



Mig Foran (7)

(/¢)

ay ty United States District Court, Northern District of Hlinois
Name of Assigned Judge James B. Moran Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 02 C 6348 DATE 12/17/2002
CASE Kevin Smith et al. Vs. Phoenix Bond & Indemnity
TITLE

[in the following box (a) indicate the party filing the motion, c.g., plaintiff, defendant, 3rd purty plaintiff, and (b) state Lrietly the nature

of the motion being presented.]

qu)

MOTION:
Memorandum Opinion and Order
DOCKET ENTRY:
(1) oO Filed motion of | usc listing in “Motion” box above.]
Q) Oo Brief in support of motion due
QB) Oo Answer bricfto motion due____.- Reply to answer bricf duc.
(4) oO Ruling/Hearingon_— set for at
(3) a Status hearing[held/continued to] [set for/re-set for]on___sset for at
(6) Qq Pretrial conference[held/continued to] [set for/re-set for]on__— set for at
(7) Oo Trial[set for/re-set for] on __ at.
(8) Oo [Bencl/Jury trial] [Hearing] held/continued to at__
(9) o This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) Ol Local Rule 41.1. OFRCP41(a\(1)  C)FRCP41(a)(2).
(10) Ml [Otherdocketentry]) Enter Mcmorandum Opinion and Order. Phoenix moves to dismiss this appeal

based on lack of standing. We find that Homeside has standing to bring this appeal but deny the appeal

on substantive grounds, The bankruptcy court’s order is affirmed.

i [For further detail see order attached to the original minute order.]

No notices required, advised in open court. fie

No notices required

Notices mailed by judge's staff, DEC 1 8 2002

Notified counse! by telephone,

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Dateltime received in
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No, 02 C 6348 (Bankruptcy No. 00 B 22481) Page 6

the redemption periud of § 108(b) would render the latter provision superfluous, Jd, The
Murray court’s reasoning is persuasive. Imposing § 108(b) does not render the provisions in
§ 1322 insignificant, it only limits the time period in which they can be applied. On the other

hand, the Bates analysis renders § 108(b), and the additional 60 days provided by Congress,

superfluous. Judge Ginsburg’s opinion, following Murray and interpreting Tynan, correctly
applies § 108(b) to the facts of this case.

Here, the debtor and Homeside had notice on September 12, 2000, of the January 5,
2001, redemption cut-off. The debtor had nearly four months from notice to request
modification of his plan to include the delinquent tax claim, and five months from the filing
of his bankruptcy petition. Debtor’s failure to timely redeem the delinquent taxes cannot be
cured under §§ 1322(c)(1) or 1322(b)(2) after the time period allowed under § 108(b)ended,”

CONCLUSION

For the above reasons, we affirm the decision of the bankruptcy court.

JAMES B. MORAN
ior Judge, U. S. District Court

Qee. 7 , 2002.

'We commend the attorneys for both parties for their excellent and very helpful briefs.



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION OOCKETED

KEVIN SMITH AND HOMESIDE DEC 4 g 99
LENDING, INC., ° 2002

Debtor-Appellants,

No, 02 C 6348
(Bankruptcy No, 00 B 22481)

VS.

PHOENIX BOND & INDEMNITY,

wwe ee ee eS

Appellee.

MEMORANDUM OPINION AND ORDER

On September 27, 2002, Homeside Lending, Inc, (appellant), filed an appeal of a July
31, 2002, order of Judge Ginsburg granting Phoenix Bond and Indemnity Company’s
(appellee) motion for relief from the automatic stay imposed by 11 U.S.C. § 362(a), and
denying Homeside’s and Kevin P. Smith’s (debtor) opposing motions. Phoenix moves to
dismiss this appeal based on lack of standing. We find that Homeside has standing to bring
this appeal but deny the appeal on substantive grounds. The bankruptcy court’s order is
affirmed,

BACKGROUND

The facts of this case are taken from the parties’ joint statement of facts presented to
the bankruptcy court. At all relevant times debtor was the owner of a home in Country Club
Hills, Minois (real estate), He executed a mortgage on the real estate to Inland Mortgage
Corporation in June 1997. On June 15, 1998, Homeside acquired the mortgage, and in
November 1999 filed suit to foreclose. As of March 1, 2000, the outstanding amount due on

the mortgage was over $100,000.

On January 26, 1998, Phoenix purchased delinquent property taxes on the real estate



No. 02 C 6348 (Bankruptcy No. 00 B 22481) Page 2

at the Cook County Collector’s annual tax sale and received a Certificate of Purchase as
evidence of its completed purchase. On August 3, 2000, the debtor filed his Chapter 13
voluntary petition with the bankruptcy court (In Re: Kevin P. Smith, No. OO B 22481), The
petition did not include Phoenix or the County Collector of Cook County as creditors or
claimants.

On August 28, 2000, several weeks after the bankruptcy filing, Phoenix filed a petition
for tax deed in the Circuit Court of Cook County. On September 12, 2000, notice was served
upon debtor and Homeside of Phoenix’s tax deed proceeding, At the time of service of notice,
Phoenix had no actual knowledge of debtor’s bankruptcy petition. The period of redemption
expired on January 5, 2001, without debtor redeeming the delinquent property taxes.

Debtor’s Chapter 13 plan was approved by the bankruptcy court on November 7, 2000,
Although he had been served with notice that the redemption period on the delinquent taxes
would expire in January 2001, debtor did not make a provision in his plan for payment of the
taxes, Phoenix learned of the bankruptcy proceedings in March 2001, and on April 4, 2001,
filed a petition secking leave from the automatic stay to pursue a tax deed on the real estate.

In June 2001, debtor and Homeside filed motions requesting that the automatic stay be
enforced against Phoenix and that debtor be permitted to modify his plan to allow him to cure
the tax default and satisfy Phoenix’s lien on the real estate,

In his July 31, 2001, opinion and order, Judge Ginsburg denied debtor and Homeside’s
motions and granted Phoenix’s motion for relief from the automatic stay, Homeside and
debtor subsequently filed an appeal from the order with this court. On December 3, 2001, we

granted debtor’s motion to dismiss his appeal. What remains before us is Homeside’s appeal

and Phoenix’s motion to dismiss Homeside for lack of standing,