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In re Baker

United States District Court, E.D. Michigan, Southern Division

December 5, 2017

In re SALISHA BAKER, Debtor.
v.
WAYNE COUNTY TREASURER, Appellee. SALISHA BAKER, Appellant,

          OPINION AND ORDER DENYING MOTION FOR STAY PENDING APPEAL [8]

          Laurie J. Michelson, United States District Judge

         Salisha Baker wanted to secure a steady stream of retirement income. So she purchased a number of rental properties at a tax auction and started a property-management business. But things did not go as planned. The income from the properties did not cover her costs, and she ran up sizeable debts to the Wayne County Treasurer and the Detroit Water and Sewerage Department, among other creditors.

         She filed for bankruptcy. In the Chapter 13 bankruptcy proceeding, Baker was able to “cram down” some debts and negotiate a payment plan. She remains timely on her plan payments. But in 2016, an illness kept her from work and reduced her income. As a result, she failed to pay post-petition property taxes for 2015 and 2016. Wanting to initiate tax foreclosures, the Wayne County Treasurer moved to lift the automatic stay that accompanied Baker's bankruptcy filing. The bankruptcy court found cause to lift the automatic stay. Baker moved to stay the bankruptcy court's ruling pending an appeal. The bankruptcy court denied Baker's motion.

         Baker now asks for the same relief from this Court.

         I.

         In 2015, Salisha Baker filed a voluntary petition for Chapter 13 bankruptcy protection. (R. 5, PID 24-26.) At the time, Baker had a job working for a company called MGIC. (R. 5, PID 64.) To generate a consistent stream of retirement income, she purchased several residential properties at tax auction and started a property-management business. (R. 7, PID 359; R. 8, PID 391.) Eventually, she came to own at least five properties in the City of Detroit. (R. 8, PID 391.) But the rental income and Baker's wages from MGIC did not cover her costs to operate the properties. (R. 5, PID 66-70; see also R. 5, PID 137.)

         Baker's debts drove her to seek bankruptcy protection. Baker has numerous creditors. At the time she filed her petition, Baker owed the Wayne County Treasurer $49, 024.10 in unpaid property taxes (for years 2010 to 2014). (R. 5, PID 45.) She also owed the Detroit Water and Sewerage Department for unpaid water bills. (R. 5, PID 51-52.) Chapter 13 protection allowed Baker to “cram down” (i.e. reduce) the property-tax and utility-bill debt, and she negotiated a payment plan with her other creditors. (R. 5, PID 178-79, 183.) Her plan, covering a 60-month term, requires Baker to make $675.00 payments every two weeks. (R. 5, PID 183.)

         For two years, Baker made timely payments. (R. 5, PID 312, 323.) But in 2016, an illness forced Baker to take a medical leave from MGIC. (R. 8, PID 392.) Her reduced income affected her ability to pay both her plan payments and her 2015 and 2016 property taxes. (Id.) Baker opted to make payments to her plan and did not pay property taxes for any of her properties for 2015 or 2016. (Id.) By operation of state law, failing to pay property taxes created a lien on the properties. See Mich. Comp. Laws § 211.40.

         To understand what happened next requires an understanding of some bankruptcy law. Filing a voluntary petition for bankruptcy protection operates as an automatic stay of virtually any action against the debtor by virtually any creditor. See 11 U.S.C. § 362(a). The automatic stay affords some breathing room for the debtor to effect a reorganization and prevents a disorderly rush by creditors to collect. See H.R. Rep. No. 95-595, 95th Cong., 1st Sess. 340 (1977). A creditor may, however, petition the bankruptcy court to lift the automatic stay “for cause.” 11 U.S.C. § 362(d)(1).

         Returning to Baker's situation, while the automatic stay did not prevent Wayne County's liens from attaching, see 11 U.S.C. § 362(b)(18), it did initially prevent Wayne County from enforcing those liens through tax foreclosure. See 11 U.S.C. § 362(a)(4). So the Wayne County Treasurer filed a motion in the bankruptcy court to lift the stay. (R. 5, PID 250-54.) The Treasurer argued that Baker's failure to pay post-petition property taxes amounted to “cause” sufficient to lift the stay. (R. 5, PID 261-62.) In response, Baker argued that her health concerns and timely plan payments to the trustee counseled against lifting the stay. (R. 5, PID 338.) The bankruptcy court agreed with the Treasurer. (R. 5, PID 268-270.)

         Baker then asked the bankruptcy court to stay its decision pending an appeal, but it declined to do so. (R. 8, PID 393.) Baker filed her appeal. (R. 1.) To prevent the impending tax foreclosure of her properties, Baker again seeks to stay the bankruptcy court's lifting of the automatic stay.

         II.

         The Federal Rules of Bankruptcy Procedure allow a party to request a stay from the district court. See Fed. R. Bankr. P. 8007(b). A party must first seek relief in the bankruptcy court, and if denied, a party may then petition for review in the district court. Fed. R. Bankr. P. 8007(a)(1). A stay pending an appeal is similar to a preliminary injunction, so the factors that govern a decision to issue an injunction likewise govern a decision to issue a stay. See Nken v. Holder, 556 U.S. 418, 434 (2009). Those factors are: “(1) the likelihood that the party seeking the stay will prevail on the merits of the appeal; (2) the likelihood that the moving party will be irreparably harmed absent a stay; (3) the prospect that others will be harmed if the court grants the stay; and (4) the public interest in granting the stay.” Mich. Coalition of Radioactive Material Users, Inc. v. Griepentrog, 945 F.2d 150, 153 (6th Cir. 1991).

         In analyzing the four factors, the Court engages in an individualized balancing act. See Id. at 1229 (holding that the factors are not “prerequisites that must be met” but rather “considerations . . . to be balanced”). The Supreme Court reasons that the first two factors-likelihood of success and irreparable harm-weigh the most. See Nken, 556 U.S. at 434. Parties must show greater than a “possibility” of both. Id. at 434-35. And they are closely related. See Michigan Coalition of Radioactive Material Users, Inc. v. Griepentrog, 945 F.2d 150, 154 (6th Cir. 1991) (“The probability of success that must be demonstrated is inversely proportional to the amount of irreparable injury plaintiffs will suffer absent the stay. Simply stated, more of one excuses less of the other.”). Finally, if after weighing the first two factors, the scales tip decisively in one direction or the other, the Court need not ...


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