In re Perkins

(Bankr. W.D. Ky. Feb. 1, 2017)

The bankruptcy court denies the creditor’s request for default rate interest on the secured claim. The value of the real property securing the claim was in excess of the claim amount. Case law establishes that there is a presumption in favor of the contractual rate of interest, but it is subject to rebuttal when evidence establishes the default rate is significantly higher without justification. Here, the default rate doubled the non-default rate and the court finds there was no justification under the evidence presented. Opinion below.

Judge: Lloyd

Attorney for Debtor: Sandra D. Freeburger

Attorneys for Creditor: Stites & Harbison PLLC, Brian H. Meldrum, Brian R. Pollock


Author: Matt Lindblom

In re Bratt

(6th Cir. B.A.P. Apr. 26, 2016)

The B.A.P. holds that the recently-enacted Tennessee statute setting a higher interest rate for property tax claims in bankruptcy does not in fact determine the interest rate for such a claim in bankruptcy. Here, the property tax claim was oversecured, so interest could be paid on the claim pursuant to 11 U.S.C. § 506(b). Sec. 511 provides that the interest rate shall be determined by applicable nonbankruptcy law. The court holds that the Tennessee statute was a “bankruptcy law,” and thus the regular interest rate under Tennessee law applies. Opinion below.

Judge: Wise

Attorney for Government: R. Alexander Dickerson

Attorney for Debtor: Alexander Koval

2016-04-26 – in re bratt

Author: Matt Lindblom


In re Jones

(Bankr. E.D. Ky. Aug. 3, 2015)

The bankruptcy court revisits the issue of the appropriate cramdown interest rate to apply in a Chapter 13 plan. The court holds that the “formula approach,” as set forth in the plurality opinion in Till, determines the correct rate. The debtor’s plan proposed to pay the secured creditor’s claim with interest at 5.25% (2% over the Wall Street Journal prime rate). The creditor argued that Till was not binding and that prior Sixth Circuit law provided the appropriate standard. The court provides a good discussion of the history of Till and its application in the Sixth Circuit and concludes that the “formula approach” is the correct standard. Opinion below.

2015-08-03 – in re jones

Author: Matt Lindblom

Plymouth Park Tax Services, LLC v. Bowers (In re Bowers)

(6th Cir. July 21, 2014)

The Sixth Circuit affirms the bankruptcy court’s holding that the Ohio real property tax certificate holder was not entitled to Chapter 13 plan payments that included 18% interest pursuant to an Ohio statute, but rather was only entitled to .25% interest as set forth on the certificate itself. The creditor argued the statute governing “redemption” of the certificate, which required 18% interest, controlled over another statute that provided that the interest on a tax certificate accrues at the “certificate rate of interest” while the property owner’s bankruptcy is pending. The Court held that the .25% interest rate applied, as that statutory provision was more specific and controlled over the other more general statute. Opinion below.

2014-07-21 – in re bowers