Bernardo Romero v. Corona Investments, LLC

Court of Appeals for the Seventh Circuit·Decided July 16, 2026·No. 25-2021·Published·Scudder

Opinion

In the

United States Court of Appeals For the Seventh Circuit ____________________

No. 25-2021 IN RE: BERNARDO ROMERO, Debtor. ____________________

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division-BK. No. 24-15301 — Donald R. Cassling, Bankruptcy Judge. ____________________

ARGUED FEBRUARY 13, 2026 — DECIDED JULY 16, 2026 ____________________

Before BRENNAN, Chief Judge, and HAMILTON, and SCUDDER, Circuit Judges. SCUDDER, Circuit Judge. Once again we return to the com- plexities at the intersection of Illinois property tax sales and bankruptcy law. In 2014 we held in In re LaMont that a so- called property tax purchaser “holds a secured claim” in a Chapter 13 bankruptcy. 740 F.3d 397, 411. The questions now before us emerged in LaMont’s wake and require us to inter- pret and apply § 511(a) of the Bankruptcy Code. At the thresh- old we must decide whether a purchaser’s secured claim qualifies as a “tax claim” within the meaning of 11 U.S.C. § 511(a) and, if so, what rate of interest applies to the claim under “applicable nonbankruptcy law.” The bankruptcy court answered the first question in the affirmative and con- 2 No. 25-2021

cluded that the applicable interest rate is 18% and comes from 35 ILCS 200/21-15 of the Illinois Property Tax Code. We af- firm. I Bernardo Romero owns a home in Chicago and therefore within Cook County. The County assesses annual taxes on residential properties. And, for its part, Illinois law automati- cally imposes a lien on properties beginning on January 1 of the year property taxes begin to accrue, with payment of the taxes extinguishing the lien. See 35 ILCS 200/21-75. But Romero did not pay his property taxes from 2018 to 2021, so Cook County continued to hold a lien. As the holder of a lien, Cook County had avenues to try to recoup the property taxes Romero owed. Illinois law author- izes a county to eventually foreclose on the property or, as it did here, conduct an annual tax sale. See 35 ILCS 200/21-75, 200/21-205. A tax sale is akin to a company factoring a receiv- able—it is a way for a county to receive cash by effectively transferring to a third party (the tax purchaser) the right to receive payment made by the property owner. We described this process in detail in LaMont. See 740 F.3d at 400–01. On November 10, 2021, Corona Investments acquired at a tax sale what Illinois law calls a Certificate of Purchase for Romero’s property. See 35 ILCS 200/21-250. The Certificate of Purchase gave Corona the right, subject to various conditions, to take title to Romero’s house after a prescribed waiting pe- riod. See LaMont, 740 F.3d at 400–01 (collecting state statutes). Before that time, however, Illinois law allowed Romero to re- deem his property by paying Corona “all amounts due (which includes everything [Corona] paid to the county plus No. 25-2021 3

any penalty interest).” Id. The redemption process is the way property owners can keep their homes. All of this meant that Romero had until October 22, 2024 to pay his outstanding property taxes and redeem his home. But one week prior to that date, and surely owing to his lack of sufficient funds, he filed for Chapter 13 bankruptcy. The bankruptcy filing and its timing had consequences. Perhaps foremost, the filing triggered application of the Bankruptcy Code’s automatic stay and prevented Corona Investments from petitioning under Illinois law for a tax deed to obtain title to Romero’s home. See 11 U.S.C. § 362(a). The Chapter 13 filing, in short, allowed Romero to keep his home during bankruptcy and stave off any effort by Corona to take title to it. Romero’s Chapter 13 filing had another consequence. It resulted in Corona Investments holding a secured claim of $26,134.95 (from the tax sale) in the Chapter 13 proceeding. See LaMont, 740 F.3d at 409 (concluding that the tax pur- chaser’s “claim is secured by the debtors’ property” and therefore qualifies as a “secured claim” in the Chapter 13 bankruptcy). As someone seeking to adjust his debts under Chapter 13, Romero needed to propose a plan addressing all claims of his secured creditors. His plan had to provide that “the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim.” 11 U.S.C. § 1325(a)(5)(B)(ii). Debtors wishing to pay secured creditors under a new installment schedule, as opposed to in a lump sum upon plan confirmation, will also owe interest to com- pensate the creditor for delayed payment. See Till v. SCS Credit Corp., 541 U.S. 465, 474 (2004) (explaining that because 4 No. 25-2021

a “debtor’s promise of future payments is worth less than an immediate payment of the same total amount” upon plan confirmation, and because “there is always some risk of non- payment,” a Chapter 13 debtor will owe interest to secured creditors). On this much the parties agree. What they dispute is the interest rate applicable to the amount Romero owes Corona Investments on its secured claim. We granted interlocutory review under 28 U.S.C. § 158(d)(2)(A) to resolve this question. II A We begin by discerning the nature of the claim Corona In- vestments held in Romero’s Chapter 13 bankruptcy. The char- acterization informs where we look for the applicable interest rate. The bankruptcy court concluded that Corona held a “tax claim” within the meaning of § 511(a) of the Bankruptcy Code. This determination meant, by further application of § 511(a), that “applicable nonbankruptcy law” would deter- mine the rate of interest on Corona’s secured claim. Section 511(a) of the Bankruptcy Codes provides the fol- lowing: If any provision of this title requires the pay- ment of interest on a tax claim or on an admin- istrative expense tax, or the payment of interest to enable a creditor to receive the present value of the allowed amount of a tax claim, the rate of interest shall be the rate determined under ap- plicable nonbankruptcy law. No. 25-2021 5

While the parties agree that Romero owes interest on Co- rona Investments’ secured claim, they dispute whether the firm holds a “tax claim” within the meaning of § 511(a). Con- gress left the term undefined. But the Bankruptcy Code does define the more general term “claim” as either a “right to pay- ment … or … right to an equitable remedy for breach of per- formance if such breach gives rise to a right of payment” in a vast array of circumstances. 11 U.S.C. § 101(5). This broad def- inition covers many rights to payment. See Johnson v. Home State Bank, 501 U.S. 78, 83 (1991) (“Congress intended by this language to adopt the broadest available definition of ‘claim.’”).

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