Till v. SCS Credit Corporation
The Tills filed for bankruptcy protection under Chapter 13. SCS Credit Corporation, a secured creditor of the Tills, objected to confirmation of the Tills' Chapter 13 plan because the interest rate it would receive was insufficient. The bankruptcy court confirmed the plan over the objection of SCS, in accordance with the "cramdown" provision of Chapter 13, holding that the interest rate should be the prime rate plus a risk adjustment of 1.5%. The district court reversed, holding that the proper interest rate should be based on what SCS would receive for a loan of similar risk and duration, or 21%. The court of appeals vacated the opinion of the district court, holding that the proper interest rate should be determined using the "coerced loan" theory, and remanded the case to bankruptcy court for a hearing to determine the proper rate of interest.
Questions Presented:
1. Is an undersecured creditor entitled to the "indubitable equivalent" of its nonbankruptcy entitlement for purposes of discounting deferred payments to present value under the Chapter 13 cramdown
provision at 11 U.S.C. ? 1325(a)(5)(B)(ii), resulting in fixing of a subprime lender's 21% contract rate as the presumptive discount rate?
2. What is the proper method for discounting of deferred payments to present value on property retained by the debtor under the Chapter 13 cramdown provision, and what is the creditor entitled to
be compensated for in calculating the appropriate discount rate of interest?
