Smith v. SIPI, LLC

Federal 7th Circuit Court
Civil Court
Bankruptcy
Citation
Case Number: 
No. 15-1166
Decision Date: 
January 20, 2016
Federal District: 
N.D. Ill., E. Div.
Holding: 
Reversed

In bankruptcy proceeding in which debtors sought to set aside as fraudulent transfer under 11 USC section 548(a)(1)(B) tax sale of debtors’ home, Dist. Ct. erred in reversing Bankruptcy Ct. determination that that instant tax sale was not for “reasonably equivalent value” where: (1) purchase price of property at tax sale is generally nothing more that sum of delinquent taxes; (2) Illinois’s tax sale method has no correlation between sale price and value of property; and (3) instant tax sale was for $4,046.26, while debtors’ home was worth between $50,000 and $110,000. Ct. further found that: (1) debtors had standing to bring instant action since debtors had filed Chapter 13 petition; (2) Bankruptcy Ct. properly limited debtors’ recovery to $15,000, which corresponded to amount debtors were entitled to under homestead exemption; (3) purchaser of tax deed, as “initial transferee,” was liable to debtors for said exemption amount; and (4) subsequent purchaser of debtors’ home was not liable for any amount where Bankruptcy Ct. found that subsequent purchaser bought debtors’ home from initial transferee in good faith and without knowledge that initial transfer of debtors’ home via tax sale was for less than its reasonably equivalent value.