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23
Sep
2020

Cram Down Balance Interest Rate

A “cram down” in a Chapter 13 plan proposes repayment to the creditor of only the actual value of the collateral. Here, the debtor attempted to cram down a secured loan with an interest rate on the unpaid balance of less than the original contract rate and less than the prime rate of interest.

Debtor’s attorneys often propose a similar cram down — some with no interest on the balance.

Title 11 U.S.C., Section 1325 provides, in pertinent part, that a condition of confirmation in a Chapter 13 case is that with respect to the secured claim allowed, the plan provide that the holder of a secured claim retain its lien, and that the creditor be repaid the value of the property as of the date of the plan.

The Bankruptcy Code does not address whether interest should be paid on the proposed cram down plan. In this case, however, the Court decided that the prevailing interest rate to be charged on a cram down is the prime rate of interest.

The Court analyzed the various interest rates, including the cost of funds and the Treasury Bill interest rate. The Court ruled that the prime rate of interest should apply to the unpaid balance on a Chapter 13 cram down plan.  In the Matter of Jared Jordan, 130 B.R. 185.

Author: Charles R. Harroun, Attorney at Law



This entry was posted on Wednesday, September 23rd, 2020 at 4:32 am and is filed under Bankruptcy, Secured Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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