By Andrew J. Abrams
Boodell & Domanskis, LLC
In Smith v. SIPI, LLC (In re Smith), 811 F.3d 228 (7th Cir. 2016), the United States Court of Appeals for the Seventh Circuit found that a lawfully conducted sale of real estate under Illinois’ tax sale procedures can be avoided if the sale was not for “reasonably equivalent value” for purposes of Section 548(a)(1)(B) of the Bankruptcy Code. This decision is significant – particularly for attorneys in Illinois and other states that employ a similar “interest rate method” for collecting delinquent real estate taxes – in holding that, unlike with mortgage foreclosure sales, compliance with the Illinois tax sale procedures does not insulate a property’s tax sale to satisfy delinquent real estate taxes from avoidance actions.