Tax Sale Can be Redeemed Through Chapter 13 Plan

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By Daniel Gill

A Georgia bankruptcy court has ruled for a second time in a little over a month that a Chapter 13 debtor could redeem real property sold at a tax sale through a repayment plan.

The Dec. 18 opinion by Judge Barbara Ellis-Monro, U.S. Bankruptcy Court for the Northern District of Atlanta, followed a ruling Nov. 13 by Judge Mary Grace Diehl.

In the most recent case, Patricia Louise Woodley owned property, not her residence, that was subject to a tax sale. Encore Assets LLC was the highest bidder in the sale and took title subject to Woodley’s right of redemption, the court said.

Woodley filed for Chapter 13 on Feb. 28, 2017, before expiration of the redemption period. In Chapter 13, individuals receiving regular income can obtain debt relief while retaining their property. To do so, debtors must propose a plan that uses future income to repay all or a portion of their debt over a three- to five-year period.

Woodley proposed to pay off the full redemption amount over the life of her plan. Encore objected and asserted that it held title to the property, not Woodley, who held only the right to redeem. Encore said it was entitled to be paid in full before expiration of the 12-month redemption period.

The court noted that there is a split in the district and nationally on this question, and that the issue is a “close one.” But ultimately the judge approved the plan.

The court analogized the tax deed with security transfer deeds. Neither of those instruments “transfer the bundle of rights that comprise what is typically understood as property ownership—the rights of possession, use, profits, exclusion of others,” it said.

The court relied on Georgia case law to establish the issue of who “owns” property sold at a tax sale. That precedent held that the tax sale did not convey legal title, “which remained with the delinquent taxpayers under their right of redemption.”

Claims are to be construed broadly, the court said, and Encore had a secured claim in the bankruptcy case.

Because the property was property of the debtor, and therefore property of the bankruptcy estate, Woodley could modify Encore’s secured claim under 11 U.S.C. §1322(b)(2). Because Encore would be paid in full by the plan, it was permissible, the court said.

Milton D. Jones, Morrow, Ga., represented Woodley. Encore was represented by E. Berk Sauls, Atlanta.

The case is Encore Assets, LLC v. Woodley (In re Woodley) , 2017 BL 451801, Bankr. N.D. Ga., No. 17-53630-BEM, 12/18/17 .

To contact the reporter on this story: Daniel Gill in Washington at

To contact the editor responsible for this story: Jay Horowitz at

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