Law Review Note: Kleinman, Michael- Interest Rate Determination Methods in Bankruptcy Chapters 11, 12, and 13

Available at:   https://scholarship.law.stjohns.edu/bankruptcy_research_library/359/

Abstract:

The United States Supreme Court's decision in Till v. SCS Credit Corp. established a formula approach for determining interest rates in cases filed under chapter 13 of title 11 of the United States Code (the "Bankruptcy Code"). The Till decision implemented the formula approach, requiring the national prime rate to be augmented by a risk premium to account for the debtor's heightened nonpayment risk. Till is limited to chapter 13 cases, however, courts have applied the Till test in chapter 11 and 12 cases.

This memorandum examines the different methods utilized in bankruptcy to determine appropriate interest rates. Section I outlines the legal framework for determining interest rates in bankruptcy under the Bankruptcy Code. Section II examines the impact of the Till decision on interest rate strategies across chapters 11, 12, and 13

 Commentary:

This note takes  as a clear  premise that Till v. SCS Credit Corp applies to all reorganization chapters in bankruptcy,  but unfortunately at the time  it was wending through the appellate process to the Supreme Court,  the Chapter 11 debtor's bar  failed to recognize (yet again)  that  lowly consumer cases  have dramatic impacts on lofty corporate reorganizations.  For that reason alone,  those attorneys and law firms should be stolid and regular donors to National Consumer Bankruptcy Rights Center,  as it is one of the few organizations that regularly appears as an amici on behalf of debtors in bankruptcy appeals.

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