In Nealy v. Ivy Holdings (In re Nealy), 623 B.R. 278 (Bankr. D.N.J. 2021), the U.S. Bankruptcy Court for the District of New Jersey found that a Chapter 13 debtor lacked authority to bring an action to avoid the transfer of her family’s real property in a prepetition foreclosure sale. Because the debtor’s objective was solely to recover title to the property in order to preserve her homestead exemption, and because the relief the debtor sought was not limited to the value of her exemption, the Nealy court held that the debtor could not pursue her requested relief.

Background

On Dec. 23, 2019, Fertima C. Nealy filed for bankruptcy protection pursuant to Chapter 13 of the U.S. Bankruptcy Code. Before her bankruptcy filing, Nealy purportedly owned a partial interest in real property passed down from her grandparents. However, because certain real estate taxes assessed against the property remained unpaid, the property was eventually sold through foreclosure proceedings, and title to the property was ultimately transferred to Ivy Holdings, LLC, the assignee of the tax sale certificate covering the property in question.

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