In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 02-2593

NORMA I. COLON,

Debtor-Appellant,

v.

OPTION ONE MORTGAGE CORPORATION,

and/or its assigns,

Appellee.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 02 C 1441—Charles P. Kocoras, Chief Judge.

____________

ARGUED DECEMBER 13, 2002—DECIDED FEBRUARY 11, 2003

____________

Before RIPPLE, KANNE and ROVNER, Circuit Judges.

RIPPLE, Circuit Judge. This case requires that we determine the relationship between 11 U.S.C. § 1322(c)(1) of

the Bankruptcy Code and the Illinois Mortgage Foreclosure Law, see 735 ILCS 5/15-1508(b). This issue has divided the bankruptcy and district courts sitting in Illinois.

In this case, the bankruptcy court and the district court

determined that the right of an Illinois debtor to cure a

default expires upon completion of the foreclosure sale

of the property and does not continue during the period

between that sale and the judicial confirmation of that sale
2 No. 02-2593

by the state court. We agree with that determination, and

therefore affirm the judgment of the district court.

I

BACKGROUND

A.

The underlying facts are not disputed. On January 14,

2000, Ms. Colon executed a note secured by a mortgage

on her principal residence located in Lincolnwood, Illinois.

On November 14, 2000, Option One Mortgage Corporation (“Option One”), the holder of the note, filed a complaint in the Circuit Court of Cook County to foreclose

the mortgage. On May 16, 2001, a judgment for foreclosure and sale was entered in that foreclosure proceeding;

on January 7, 2002, the sheriff conducted a foreclosure

sale of the residence. On January 10, 2002, prior to the

judicial confirmation hearing mandated by the Illinois

Mortgage Foreclosure Law, Ms. Colon filed a voluntary

petition under Chapter 13 of the Bankruptcy Code. She

also filed a Chapter 13 plan, which provided for the cure

of her default on the note and mortgage. On February 4,

on the motion of Option One, the bankruptcy court lifted

the automatic stay to permit Option One to proceed in

the Illinois foreclosure action. Ms. Colon appealed this

decision of the bankruptcy court to the district court; that

court upheld the decision of the bankruptcy court. Ms.

Colon then took this further appeal to this court.

B.

In determining that the bankruptcy court had committed no error in lifting the automatic stay and in permitting the foreclosure hearing to proceed in the Illinois
No. 02-2593 3

court, the district court recognized that it had to determine whether Illinois law allows a debtor to cure a default

after the property is sold at a foreclosure sale. The court

further recognized that, in deciding this matter, it had to

determine the relationship between § 1322(c)(1) of the

Bankruptcy Code and the Illinois Mortgage Foreclosure

Act, 735 ILCS 5/15-1501-09. Section 1322(c)(1) of the Bankruptcy Code provides that “a default with respect to, or

that gave rise to, a lien on the debtor’s principal residence

may be cured . . . until such residence is sold at a foreclosure sale that is conducted in accordance with applicable

nonbankruptcy law. . . .” 11 U.S.C. § 1322(c)(1). The Illinois

Mortgage Foreclosure Act sets forth a multi-step process,

culminating in a hearing after the property is purchased

in the sheriff’s sale. More precisely, the Illinois statute

requires that, after the sheriff’s sale, there must be a hearing before the state court. That court must approve the

sale unless it determines that the sale was flawed in one

of four ways: (1) the notice given was not proper; (2) the

sale terms were unconscionable; (3) the sale involved

fraud; or (4) justice was not otherwise done. See 735

ILCS 5/15-1508(b). If the court approves the sale, the

purchaser is permitted to exchange the certificate of sale

issued at the foreclosure sale for a deed that conveys title.

The district court concluded that, for purposes of bankruptcy, a debtor’s right to cure a default is extinguished

after the property has been sold at a judicial sale, not

when a sale is confirmed by the state court. The court concluded that:

Although confirmation is not a mere formality in the

state arena, its significance to federal concerns is too

minimal to justify extending the period for cure to

that point. For the purposes of § 1322(c)(1), the sale

is conducted in accordance with applicable nonbank-
4 No. 02-2593

1 All courts that have considered the matter agree that an order lifting the automatic stay is a final judgment. See 1 Alan

Resnick & Henry J. Sommer, Collier on Bankruptcy, § 5.08, at 5-

(continued...)

ruptcy law once the highest bid is entered and accepted.

Any other result would allow a federal procedural

mechanism to afford greater rights than would otherwise be available under state substantive law.

Colon v. Option One Mortgage, No. 02 C 1441, 2002 WL

1263986, at *2 (N.D. Ill. June 6, 2002).

The district court further reasoned that “Congress clearly intended to extend the debtor’s right to cure to the

outer limits allowed under state law . . . [but] the intent

could not have included a desire to permit the debtor,

through creative invocation of bankruptcy protection, to

do an end-run around state law once all substantive

events have come and gone.” Id. The district court accordingly determined that the bankruptcy court’s decision

was not based on an erroneous legal conclusion and,

therefore, the bankruptcy court had not abused its discretion in permitting the state confirmation hearing to

proceed. Id.

II

DISCUSSION

A.

The parties agree that the district court correctly stated

the standard of review. The bankruptcy court’s grant of

relief from the automatic stay is reviewed for an abuse of

discretion. See In re Williams, 144 F.3d 544, 546 (7th Cir.

1998).1

 However, a court necessarily abuses its discretion
No. 02-2593 5

1 (...continued)

31-32 n.2 (15th ed. 2002) (noting holdings of 1st, 2nd, 3rd, 6th,

and 11th Circuits). We have not directly addressed the issue. We

see no reason to disagree with the other circuits. Foreclosure

typically will follow close on the heels of lifting the stay. If the

debtor were required to wait to appeal the judgment, the

property would likely have been sold, leaving no relief for

the debtor. See id. at 5-32.

when its decision is based solely on an erroneous conclusion of law. See United Air Lines, Inc. v. Int’l Ass’n of Machinist & Aerospace Workers, AFL-CIO, 243 F.3d 349, 361

(7th Cir. 2001). When reviewing the bankruptcy judge’s

conclusions of law, this court applies a de novo standard.

See Meyer v. Rigdon, 36 F.3d 1375, 1378 (7th Cir. 1994).

B.

Ms. Colon’s home was sold at a foreclosure sale before

she filed her Chapter 13 reorganization plan and, in that

plan, proposed to redeem the home that already had

been sold at the foreclosure sale. However, at the time of

the bankruptcy filing, the Illinois state courts had not yet

confirmed the sale of the property as required by the Illinois Mortgage Foreclosure Law. She therefore submits

that the bankruptcy court should not have permitted the

confirmation hearing on the judicial sale of her property

once she filed her Chapter 13 plan. As the district court

noted, this case turns on the relationship between 11

U.S.C. § 1322(c)(1) of the Bankruptcy Code and the Illinois Mortgage Foreclosure Law, see 735 ILCS 5/15-1508(b).

We must determine whether, under § 1322(c)(1) of the

United States Bankruptcy Code, a Chapter 13 plan may

cure a default on a debtor’s principal residence when

the petition and plan were filed after the residence was
6 No. 02-2593

2 Compare In re Crawford, 217 B.R. 558, 560-61 (N.D. Ill. 1998)

(concluding that under Illinois law a foreclosure sale is not

complete until entry of the order confirming the sale, so the

mortgagor may cure the arrearage until that point); Christian

v. Citibank, F.S.B., 214 B.R. 352, 355-56 (N.D. Ill. 1997) (same);

McEwen v. Fed. Nat’l Mortgage Ass’n, 194 B.R. 594, 596-97 (N.D.

Ill. 1996) (same); In re Spencer, 263 B.R. 227, 230-31 (Bankr. N.D.

Ill. 2001) (same); In re Jones, 219 B.R. 1013, 1019 (Bankr. N.D.

Ill. 1998) (same), with Colon v. Option One Mortgage, No. 02 C

1441, 2002 WL 1263986, at *2 (N.D. Ill. June 6, 2002) (finding

that right to cure mortgage arrearage on principal residence

ends at the time the highest bid is accepted by the selling officer);

In re Babington, No. 00 C 7555, 2000 U.S. Dist. LEXIS 20840, at *2

(N.D. Ill. Dec. 12, 2000) (same); In re Danaskos, 254 B.R. 416,

442 (Bankr. N.D. Ill. 2000) (same); In re Crawford, 215 B.R. 990,

997 (Bankr. N.D. Ill. 1998) (same), rev’d, 217 B.R. at 560-61; In re

Christian, 199 B.R. 382, 388-89 (Bankr. N.D. Ill. 1996) (same), rev’d,

Christian, 214 B.R. at 355-56.

sold at a foreclosure sale, but prior to confirmation of the

sale in accordance with the Illinois Mortgage Foreclosure Law. Illinois bankruptcy and district courts have

expressed disagreement on this issue.2

In resolving this issue, we must begin, as we do with

any issue of statutory construction, with the wording of

the statute. See United States v. Balint, 201 F.3d 928, 932

(7th Cir. 2000). If the wording of the statute is clear, that

is the end of the matter. See id.; United States v. Hayward, 6

F.3d 1241, 1245 (7th Cir. 1993). Section 1322(c)(1) of the

Bankruptcy Code provides, “a default with respect to . . .

a lien on the debtor’s principal residence may be cured . . .

until such residence is sold at a foreclosure sale that is conducted in accordance with applicable nonbankruptcy law.” 11

U.S.C. § 1322(c)(1) (emphasis supplied). The Illinois Code

states in pertinent part:
No. 02-2593 7

[T]he court shall conduct a hearing to confirm the

sale. Unless the court finds that (i) a notice required

in accordance with subsection (c) of Section 15-1507

was not given, (ii) the terms of sale were unconscionable, (iii) the sale was conducted fraudulently or (iv)

that justice was otherwise not done, the court shall

then enter an order confirming the sale.

735 ILCS 5/15-1508(b).

The parties dispute whether § 1322(c)(1)’s reference to

a “foreclosure sale that is conducted in accordance with

applicable nonbankruptcy law” terminates the debtor’s right

to cure the default at the close of the auction or whether

that right continues until the state court confirms the sale.

11 U.S.C. § 1322(c)(1) (emphasis supplied).

1. Plain Wording

Not surprisingly, each side submits that its view is

supported by the plain language of § 1322(c)(1). Option

One notes that § 1322 employs the word “sale” rather

than “completion of the sale,” “confirmation of the sale,”

or “transfer of the deed.” See Appellee’s Br. at 8-9. It further emphasizes that the same provision speaks in terms

of the sale being “conducted” rather than “completed.” Id.;

see also In re Danaskos, 254 B.R. 416, 419 (N.D. Ill. 2000)

(distinguishing between conduct of sale itself and confirmation hearing).

Other language of the provision must also be taken

into account and arguably supports Ms. Colon. The statutory provision refers to a sale “conducted in accordance

with applicable nonbankruptcy law.” 11 U.S.C. § 1322(c)(1).

Although this provision may be read as simply addressing

the manner in which the sheriff’s sale is to be conducted,
8 No. 02-2593

3 See, e.g., Christian, 214 B.R. at 354-55 (citing Illinois cases for

proposition that “sale of foreclosed property is not complete

until the court enters an order confirming the sale” (citations

(continued...)

it also may be read as permitting state law to define the

point at which the forfeiture sale ought to be considered

complete. Although the latter reading of the statute seems

most plausible, we think that the statute is sufficiently

ambiguous to permit us to consult, albeit with great caution, the existing legislative history.

2. Legislative History

There does not appear to be much debate about the

immediate impetus for the current version of the provision.

As noted in In re Crawford, 217 B.R. 558, 559 (N.D. Ill. 1998),

the immediate situation that led to the enactment of

§ 1322(c)(1) was Congress’ desire to overturn the Third

Circuit’s holding in In re Roach, 824 F.2d 1370 (3d Cir. 1987).

In that case, the Third Circuit had held that “the right to

cure a default on a home mortgage . . . does not extend

beyond the entry of a foreclosure judgment.” Roach, 824

F.2d at 1379. This immediate objective does not reveal

necessarily the entire scope of the task that Congress

intended this provision to accomplish.

In Crawford, the court concluded that the statutory reference to “applicable nonbankruptcy law” clearly indicates

that Congress was not attempting to create a nationwide

federal rule, but to leave substantive mortgage foreclosure law in the hands of the states. Id. at 559 n.2. Other

district courts considering this issue have followed the

same path and therefore looked to state law to determine

the contours of the debtor’s right to redeem.3

 Our own
No. 02-2593 9

3 (...continued)

omitted)); McEwen v. Fed. Nat’l Mortgage Ass’n, 194 B.R. 594,

596 (N.D. Ill. 1996) (concluding that, rather than focusing on

rights of parties or other bankruptcy court decisions, bankruptcy

court should have focused “upon what it means to conduct

a foreclosure sale in accordance with Illinois law,” namely

“foreclosure sale has not been conducted until the judicial

sale has been confirmed by the court”).

4 Another portion of the legislative history is less supportive

but not necessarily incompatible. It notes that “[t]here may be

(continued...)

reading of the Bankruptcy Code confirms that Congress

wanted to leave to the states the right to fix the outer

limits of the right to redeem. The legislative history of the

1994 Bankruptcy Reform Act indicates that § 1322(c)(1)

is designed to:

Allow[] the debtor to cure home mortgage defaults at

least through completion of a foreclosure sale under

applicable nonbankruptcy law. However, if the State

provides the debtor more extensive “cure” rights

(through, for example, some later redemption period),

the debtor would continue to enjoy such rights in

bankruptcy.

140 Cong. Rec. H10,769 (daily ed. Oct. 4, 1994) (remarks

of Rep. Jack Brooks) (emphasis supplied), reprinted in

Vol. E, Alan Resnick & Henry J. Sommer, Collier on Bankruptcy, App. Pt. 9(b), at 92 (15th ed. 2002); see also 5 William

L. Norton, Jr., Norton Bankruptcy Law & Practice § 121:6,

at 121-81 (2d ed. 1997) (finding this legislative history

persuasive and concluding that § 1322(c)(1) “assures

that . . . [redemption] rights are cut of[f] [sic] no earlier

than the foreclosure sale date”); Christian, 214 B.R. at 355

(citing this legislative history as persuasive).4
10 No. 02-2593

4 (...continued)

several months between the court order and the foreclosure

sale. Section [1322(c)(1)] will preempt conflicting State laws,

and permit homeowners to present a plan to pay off their

mortgage debt until the foreclosure sale actually occurs.” 140

Cong. Rec. S14462 (1994) (comment of Senator Grassley) (emphasis supplied), as cited in Crawford, 215 B.R. at 996.

We also note that there is significant scholarly support

for the view that the states have the last word in determining the scope of the right of redemption:

The statutory language and legislative history thus

leave to state law the question of when a foreclosure

sale has been completed. In some states, a sale may not

be deemed completed until the court has entered

an order confirming the sale . . . . It may well be significant that Congress did not say that the debtor may

cure “until the sale” or “until the date of the foreclosure sale,” indicating that the completion of the

sale might be on a later date than the date of the auction. . . . The statutory language does not state that

the debtor may cure if and only if there has not been

a foreclosure sale, nor does it state that the debtor

may not cure after such a sale if state law permits a

cure. It was not the intent of Congress to cut off cure

rights which debtors had previously enjoyed.

8 Resnick & Sommer, Collier on Bankruptcy § 1322.15,

at 1322-51.

We must conclude that the legislative history, although not entirely conclusive, lends significant support

to the view that Congress intended to extend the right to

cure at least up to the date of the foreclosure sale. There

is also significant evidence that Congress intended that
No. 02-2593 11

5 See Commercial Credit Loans, Inc. v. Espinoza, 689 N.E.2d 282,

285 (Ill. App. Ct. 1997) (relying on Citicorp and noting that the

high bid at a judicial sale is a mere irrevocable offer, accepted on

confirmation by the court); Fleet Mortgage Corp. v. Deale, 678

N.E.2d 35, 37 (Ill. App. Ct. 1997) (citing Citicorp for proposition

that there is no true sale until confirmation). See also Plaza Bank

v. Kappel, No. 1-01-2854, 2002 WL 31427407, at *4 (Ill. App. Ct.

Oct. 28, 2002) (“It is well-settled in Illinois that a judicial foreclosure sale is not complete until it has been approved by the

trial court.” (citing Commercial Credit, 689 N.E.2d at 285)); Grubert

v. Cosmopolitan Nat’l Bank of Chi., 645 N.E.2d 560, 563 (Ill. App.

Ct. 1995) (“A foreclosure sale is not final until it is confirmed,

(continued...)

the states were to have the last word in setting the outer

limits of the right to redeem. Therefore, to determine

the scope of the right to cure a mortgage default, we

must turn to the applicable state law.

C.

The most direct statement on the Illinois Mortgage

Foreclosure Law’s confirmation provision is found in

Citicorp Savings of Illinois v. First Chicago Trust Co. of Illinois,

645 N.E.2d 1038 (Ill. App. Ct. 1995). In Citicorp, the court

concluded that “[i]n Illinois it is clear that a judicial sale

is not complete until it has been approved by the trial

court.” Id. at 1045. The court further noted that “[t]he

highest bid received by a sheriff at a judicial sale is merely

an irrevocable offer to purchase the property and acceptance of the offer takes place when the court confirms

the sale . . . . Until the court confirms the sheriff’s proceedings, there is not a true sale in the legal sense.” Id.

Later Illinois appellate decisions similarly adopt this

position.5

 We note, however, that these decisions were
12 No. 02-2593

5 (...continued)

an action which rests within the circuit court’s discretion.”

(citation omitted)).

6 See Plaza Bank, 2002 WL 31427407, at *2 (evaluating whether

confirmation of sale should be reversed for lack of prosecution);

Espinoza, 689 N.E.2d at 285 (finding unconscionable terms);

Fleet Mortgage Corp., 678 N.E.2d at 38 (finding negligent failure

to cancel sale after debtor agreed to redeem, therefore refusal

to confirm sale was correct); Citicorp, 645 N.E.2d at 1045 (refusing to confirm because of mistake); Grubert, 645 N.E.2d at

563 (evaluating scope of trial court’s authority to confirm revision

of purchase price).

rendered in the context of analyzing the statutorily prescribed situations that require the denial of confirmation

of the foreclosure sale.6

 Although these decisions are helpful in determining the scope of the right of redemption

in Illinois, we must search a bit further to determine definitively whether the right of redemption extends to

the judicial confirmation of the sale and, if so, the nature

of that extension.

By considering the entire Illinois statutory scheme, we

may more accurately characterize the relationship between that scheme and the bankruptcy provision. In Illinois, a mortgagor has ninety days to reinstate a mortgage

from the time of the service of the summons or of otherwise submitting to the court’s jurisdiction. See 735 ILCS

5/15-1602. “The court may enter a judgment of foreclosure prior to the expiration of the reinstatement period,

subject to the right of the mortgagor to reinstate the mortgage. . . .” Id. Reinstatement leaves the mortgage documents in place as if no default or acceleration had occurred. Id.
No. 02-2593 13

7 See First Illinois Nat’l Bank v. Hans, 493 N.E.2d 1171, 1174

(7th Cir. 1986) (“Inherent in every mortgage . . . is an equitable

right of redemption. . . . The equitable right of redemption

arises at the time of default and generally lasts until such time

as there is a foreclosure sale, after which the mortgagor can

only redeem his property under the redemptive rights provided by statute. In other words, once the foreclosure sale occurs, the equitable right of redemption ends.”).

Illinois law also provides for both equitable and statutory rights of redemption. The equitable right of redemption arises at the time of default and lasts until the foreclosure sale, after which the mortgagor may only redeem

his property under the redemptive rights provided by

statute. See 16 Ill. Jur., Property § 19:73, at 83 (1994).7

 The

statutory right of redemption for residential real estate

is seven months from i) the date of service or submission

to the court’s jurisdiction or ii) three months from the

date of entry of a judgment of foreclosure. See 735 ILCS

5/15-1603(b)(1).

Whether a homeowner has redemption rights after the

sheriff’s sale therefore depends upon the date of the sale.

“If the property is sold before the redemption period

ends, the purchaser takes the property subject to the possibility of redemption, but the mortgagor can convey the

right to redeem by quitclaim deed before the expiration

of the redemption period.” 16 Ill. Jur., Property § 19:73, at

84. The situation of redemption rights existing after a

sale should not occur often because 735 ILCS 5/15-1507(b)

provides that a judicial sale shall be held upon expiration

of all statutory redemption rights. Given this language, it

is likely that, in most cases, the mortgagor’s statutory

right to redeem or reinstate will expire before the foreclosure sale occurs.
14 No. 02-2593

8 See Van Fleet v. Van Fleet, 467 N.E.2d 592, 595 (Ill. App. Ct. 1984)

(indicating that the “title of the holder of the right to redeem is

a fee title. If a deed is never issued to the holder of the certificate of sale, the title remains in the holder of the right to redeem and does not revest in him. The holder of the right

to redeem never loses title until the deed actually issues.”).

If a statutory right to redeem has expired and a court has

refused to permit equitable redemption, under Illinois

law the mortgagor normally will have lost the right to

redeem before the sale. However, because § 1322(c)(1) of

the Bankruptcy Code provides a statutorily protected

right to cure at least until the foreclosure sale, the Bankruptcy Code gives the debtor more protection than Illinois requires.

If a sale is not confirmed because the state court determines that one of the four statutory impediments to confirmation is present, the operation of § 1322(c)(1) of the

Bankruptcy Code, and the possibility of equitable redemption again would be operative. But these rights of redemption after the completion of the initial sale are entirely

contingent on the state court’s disapproval of the initial

sale.8

D.

The foregoing discussion permits the following resolution of the issue before us. Section 1322(c)(1) of the Bankruptcy Code states that a default on a mortgage lien “may

be cured . . . until such residence is sold at a foreclosure sale

that is conducted in accordance with applicable nonbankruptcy

law.” 11 U.S.C. § 1322(c)(1) (emphasis supplied). The statute’s wording and its legislative history both indicate an

intent to set the limit on the right to cure no earlier than
No. 02-2593 15

the date of the judicial sale. This was Congress’ response to

In re Roach. However, the provision’s reference to “applicable nonbankruptcy law” requires deference to state mortgage law on the scope of any right to cure after the sale.

After our study of Illinois foreclosure law, we cannot

conclude that the convergence of § 1322(c) and Illinois

foreclosure law provides anything like an absolute right

to cure a default up until the time of the confirmation

hearing. In this context, neither the wording nor the legislative history provides support for reading § 1322(c) as

creating a more expansive right to cure than that which

the Illinois Code provides. Indeed, it is clear that any right

to cure after the time of the sale would have to be found

in the state foreclosure law. The Bankruptcy Code is most

logically read in this context to permit cure to the extent

that Illinois law does.

Under state law, after the completion of the judicial

sale, assuming that the redemption period has run, the

purchaser at that sale has a presumptive right to eventual ownership of the property, a right contingent on

the highly circumscribed authority of the state court to

void the sale on any of the four grounds set forth in the

statute. Although the Illinois courts have employed language that, read alone, might suggest that the judicial

sale does not actually occur until confirmation, these

cases must be read in the context of the entire statutory

scheme that requires confirmation, unless one of four

statutory exceptions apply. To read the Illinois courts’

statements that the sale does not “legally” occur until the

confirmation out of context creates a right to cure up

until the time of confirmation that simply is unavailable

under the state statutory scheme and, indeed, that would

frustrate the operation of that scheme. The appropriate

reading of this precedent is that, once a judicial sale

takes place, a potentially binding contract exists that may

not be enforced until confirmed by the court.
16 No. 02-2593

E.

Ms. Colon attempted to redeem her residential property

after the judicial sale. Because Ms. Colon had no right to

redeem the residence at the time she filed her plan under

Chapter 13, the bankruptcy court certainly did not abuse

its discretion in determining that the automatic stay

should be lifted and the state court permitted to determine whether the foreclosure sale conducted prior to the

filing of the Chapter 13 petition suffered from any of the

statutory infirmities that would render it void. If the

state court determines that the sale was valid, the sale

will be final, and Ms. Colon will have been deprived of

no right under either the Bankruptcy Code or Illinois law.

If the sale is void, she will have the rights under the

Code and state law of a debtor whose property has not

yet undergone a judicial sale.

Conclusion

Accordingly, the judgment of the district court is

affirmed. 

AFFIRMED

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—2-11-03