Courts and justice
Some Michigan homeowners can undo recent tax foreclosures in bankruptcy
Some Michigan homeowners who file Chapter 13 repayment bankruptcy soon after a tax foreclosure may still be able to unwind the county’s title transfer, giving them a narrow way to get their homes back.
A federal appeals court said some Michigan homeowners may still be able to use Chapter 13 bankruptcy to unwind a recent tax-foreclosure transfer. The decision turns on timing and gives debtors a limited but important backstop after the county takes title.
- Some Michigan homeowners may be able to use Chapter 13 to challenge a recent tax foreclosure.
- The Sixth Circuit said Bay County’s title transfer to Carrie Reinhardt’s property was avoidable as a preference.
- The ruling matters most when bankruptcy comes soon after the county takes title.
- It is a narrow path, not a blanket fix for every tax foreclosure.
- Michigan homeowners who file Chapter 13 bankruptcy soon after a tax foreclosure deadline may still have a way to claw back their property
Michigan homeowners who file a repayment bankruptcy soon after a tax-foreclosure deadline may still be able to get their homes back. The Sixth Circuit said Bay County’s title transfer to Carrie Reinhardt’s home can be undone if the filing came soon enough after the county took title.
In Reinhardt’s case, Bay County received title on March 31, 2022, after the foreclosure deadline had passed. Reinhardt filed Chapter 13 shortly afterward and asked the court to undo the transfer, arguing that the county should not get to keep the property simply because title had already changed hands.
When title is not the final word
The appeals court sided with Reinhardt and reversed, saying the transfer met the Bankruptcy Code’s preference rules under 11 U.S.C. § 547(b)(4) and 11 U.S.C. § 547(b)(5) as a matter of law. In plain terms, the court said the county’s title claim was not insulated from bankruptcy just because the foreclosure process had run far enough to put the property in the county’s name.
That does not rewrite Michigan’s tax-foreclosure system wholesale. It does, though, give some Chapter 13 debtors a real argument that a recent transfer can be unwound if the timing lines up the way it did here. For homeowners who miss a foreclosure deadline and then move quickly into bankruptcy, that distinction can decide whether the house is gone for good or still within reach.