Debtor Benefits from 108(b)’s Extension of Time to Redeem

Posted by NCBRC - May 5, 2016

Section 108(b) extends the right of a debtor to redeem property sold in a tax sale. Bryant v. Hamilton Cty, No. 15-12367, Adv. Proc. No. 15-1120 (Bankr. E.D. Tenn. April 5, 2016). Cherilyn Etta Bryant’s principal residence was sold to Carlton J. Ditto on June 5, 2014, in a county tax sale. On June 4, 2015, Ms. Bryant filed chapter 13 bankruptcy. The confirmed plan provided for continuing mortgage payments to Chattenooga Neighborhood Enterprise, Inc., and curing mortgage arrears. On July 31, 2015, CNE redeemed the property by paying the taxes “on behalf of the delinquent taxpayer.” Hamilton County and Mr. Ditto (Defendants) challenged the redemption as untimely. The action was before the court on Ms. Bryant’s motion for summary judgment.

Tennessee Code Annotated section 67-5-2701(a)(1) affords a tax debtor one year from the date of confirmed tax sale to redeem the property. Section 108(b) provides: “if applicable nonbankruptcy law, [or] an order entered in a nonbankruptcy proceeding, . . . fixes a period within which the debtor or an individual protected under section 1201 or 1301 of this title 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—. . .  (2) 60 days after the order for relief.” Because Ms. Bryant filed her bankruptcy petition before the expiration of the redemption period, she argued that section 108(b) gave her, and CNE as her agent, an additional 60 days within which to redeem.

The court quickly dispensed with Defendants’ argument that CNE was not acting as Ms. Bryant’s agent in light of CNE’s plain statements that it redeemed the property on her behalf.

The court moved on to address Defendants’ chief argument that section 108(b), by its terms, applies only to the trustee, noting that the Sixth Circuit has not addressed the issue. The court walked through the statutory framework beginning with section 1303 which gives the debtor the powers of the trustee to use, sell, or lease property of the estate. Section 1306(b) provides that a chapter 13 debtor remains in possession of estate property. The right to redeem is a property interest under Tennessee law and is, therefore, property of the estate. Under these provisions, the court concluded that the extension of time granted by section 108(b) applies to the debtor in chapter 13. The court reasoned that “[a]s the chapter 13 debtor is given the rights and powers of a trustee over property of the estate by virtue of § 1303 and the right of redemption constitutes property of the estate, the extension of time to exercise that right afforded to a trustee by § 108(b) is available to the chapter 13 debtor just as it is available to the chapter 11 debtor in possession.”

This conclusion is in harmony with the holdings of many bankruptcy courts that the trustee’s right under 108(b) to extend the time within which to commence litigation on a cause of action belonging to a debtor may be exercised by the debtor as well. The court likened the chapter 13 debtor’s right to avail herself of the trustee’s power under 108(b) to a chapter 11 debtor-in-possession who has been found to “essentially function[] as the trustee” pursuant to section 1107(a). While a chapter 13 debtor’s rights are not co-extensive with that of the trustee, section 1306(a) renders a chapter 13 debtor a debtor-in-possession comparable to the chapter 11 debtor. The court concluded that “[t]o hold that a chapter 13 debtor enjoys the rights of a trustee to exercise a right of redemption but does not have the benefit of the extension of time to exercise that right provided to a trustee by § 108(b) would be absurd.”

Bryant Bankr ED Tenn April 2016


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