668 B.R. 487
Bankr. E.D. Wis.2025Background
- Faytrena C. Rhodes filed a Chapter 13 bankruptcy petition and later sought to modify her confirmed plan.
- The core dispute concerned whether present-value interest on a secured car loan must accrue from the bankruptcy petition date or from the date the plan is confirmed.
- The Chapter 13 trustee objected to the modified plan, arguing it was infeasible if pre-confirmation interest was required.
- The debtor’s plan paid the full secured claim amount with 9.5% interest, starting from confirmation.
- The case turned on statutory construction of 11 U.S.C. § 1325(a)(5)(B)(ii) and the interpretation of relevant Supreme Court and circuit precedents.
Issues
| Issue | Rhodes's Argument | Trustee's Argument | Held |
|---|---|---|---|
| When does present-value interest under § 1325(a)(5)(B)(ii) begin accruing? | Interest accrues from plan confirmation (the effective date). | Interest accrues from petition date to avoid devaluation/prejudice. | Interest begins at plan confirmation, not petition date. |
| Meaning of "effective date of the plan" | "Effective date" means date of plan confirmation. | Could mean petition or other date; should avoid creditor loss. | "Effective date" is date of confirmation. |
| Whether "allowed amount of such claim" requires adjustment for time value pre-confirmation | No, the allowed amount is fixed as of petition and not time-adjusted before confirmation. | Yes, present value must be adjusted from petition to payment. | Adjustment only required as of plan confirmation. |
| Applicability of local practice or prior local caselaw | Statute and broader case law control over local practice. | Local practice supports pre-confirmation interest accrual. | Statute and higher court precedent control. |
Key Cases Cited
- Till v. SCS Credit Corp., 541 U.S. 465 (2004) (establishes that plan payments to secured creditors must have a present value as of the plan's effective date)
- Rake v. Wade, 508 U.S. 464 (1993) (interprets "effective date of the plan" as the confirmation date)
- United Sav. Ass’n of Texas v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 (1988) (emphasizes holistic statutory interpretation in bankruptcy)
- In re Burgess Wholesale Mfg. Opticians, Inc., 721 F.2d 1146 (7th Cir. 1983) (present value adjustment is as of confirmation date)
- Hamilton v. Lanning, 560 U.S. 505 (2010) ("effective date of the plan" is typically the date of confirmation)