In Re Gift, 469 B.R. 800

Debtor Anna Gift filed a Chapter 13 petition on Dec 13, 2011; Metro filed amended objection claiming 18% postpetition tax interest/penalties; Metro's tax claims totaled $1,188.41 (2011) and $8,734.93 (2006–2010) secured by real property valued at $115,100; Debtor's plan provides 100% to unsecured creditors and full payment to Metro as priority secured claim; Metro is oversecured and seeks postpetition penalties in addition to postpetition interest; parties agree postpetition interest is allowed but dispute penalties under 506(b) and 511; Court notes Debtor is solvent with assets ~$117,725 and liabilities ~$16,627.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether penalties can be treated as 506(b) costs	Metro argues penalties are fees/costs/charges under 506(b)	Gift argues penalties are not within 506(b) list	Penalties are not fees/costs/charges under 506(b)
What is the correct postpetition treatment of Metro's penalty	Metro seeks 6% penalty added to postpetition interest	Gift seeks only 12% interest under 511; penalties not allowed as secured	Penalty not secured; allowed as unsecured due to solvency
What interest rate applies to Metro's oversecured claim after confirmation	Interest at state statutory rate plus penalties	Interest rate governed by 511; apply Tennessee rate	Apply 12% annual interest under 511; no 6% penalty included in secured claim
Does 506(b) apply through confirmation only	Postpetition additions treated under 506(b) during plan	506(b) applies only to postpetition secured amounts; penalties excluded	506(b) applies up to confirmation; penalties not included in secured portion
What is treatment given solvency of debtor	Unsecured penalties payable from solvent estate	Plan must reflect unsecured claim for penalties	Penalties allowed as unsecured claim due to solvency

United States v. Ron Pair Enters., 489 U.S. 235 (1989), 489 U.S. 235 (Supreme Court 1989) (oversecured postpetition interest allowed under 506(b) (general principle))
In re Brentwood Outpatient, Ltd., 43 F.3d 256 (6th Cir. 1994), 43 F.3d 256 (6th Cir. 1994) (pre-BAPCPA view on penalties as not within 506(b) (oversecured tax liens))
In re Dow Corning Corp., 456 F.3d 668 (6th Cir. 2006), 456 F.3d 668 (6th Cir. 2006) (solvent debtor allows unsecured postpetition items; supports unsecured treatment of penalties here)
UPS Capital Bus. Credit v. Gencarelli, 501 F.3d 1 (1st Cir. 2007), 501 F.3d 1 (1st Cir. 2007) (treatment of charges/fees; relevance to 506(b) interpretation)
In re Welzel, 275 F.3d 1308 (11th Cir. 2001), 275 F.3d 1308 (11th Cir. 2001) (context on penalties/fees; distinguishes penalties from fees/costs)