Can foreclosed property be redeemed after bankruptcy?
Full Question:
Answer:
It is not clear whose bankruptcy is in question. However, for purposes of this answer, I will assume it is the person who holds a right of redemption for a piece of real estate that is subject to foreclosure.
Alabama's statutory right of redemption entitles "debtors," among others, to obtain title to foreclosed property within one year of the foreclosure sale by tendering the price paid at the foreclosure sale plus interest and other lawful charges. The right to redeem is triggered by the foreclosure sale, and the scope of what real estate may be redeemed is governed by what was sold at the foreclosure sale. See Ala.Code § 6-5-248(a) ("Where real estate . . . is sold the same may be redeemed by . . . (1) any debtor" or "(5) any transferee of the debtor . . . either before or after the sale[.]"). "The purpose of the [redemption] statutes is to allow the debtor to redeem, in all cases of sale, that which passed by the sale." Sibley v. Linton Coal Co., 193 Ala. 182, 69 So. 1, 2 (1914). By allowing redemption of real estate sold via foreclosure, the statute "prevent[s] the sacrifice of real estate at forced sales . . . and [ ] afford[s] the debtor, or his creditors, in payment of his debts, the advantage of any increase in the value of the lands, within the statutory period." Memorial Shrines, Inc. v. McConnell, 270 Ala. 266, 117 So.2d 684, 693 (1960).
In many situations, a debtor may redeem real estate even after filing for Chapter 7 or Chapter 13 bankruptcy. United States Code Section 541 provides a broad definition that a bankruptcy estate is comprised of, among other types of property, "all legal or equitable interest of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1)(1988). A right of redemption can be interpreted as an equitable interest in the property.
To exercise a statutory right of redemption under Alabama law , the mortgagor or debtor must make a lump sum cash payment of the entire purchase price paid at the foreclosure sale, plus interest, taxes, and "all other lawful charges." Ala.Code § 6-5-253(a).
