438 B.R. 854
Bankr. D.S.C.2010Background
- Debtor filed a Chapter 13 petition on July 14, 2010 to address tax debt and other obligations.
- Amended Chapter 13 plan filed October 7, 2010; University Motor Company, Inc. objected on July 19, 2010.
- Confirmation hearing held October 18, 2010; debtor testified plan would surrender several vehicles and retain two for business use.
- Debtor shows approximately $94,856 secured debt (excluding taxes) and $3,806 unsecured nonpriority debt; tax debt totals $44,067 with $27,806 secured and $5,719 priority.
- Creditor argues plan is not in good faith or feasible and seeks a higher interest rate; court must determine feasibility, good faith, and appropriate interest rate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the plan was proposed in good faith and is feasible. | Creditor contends plan lacks good faith and feasibility due to vehicle purchases and post-petition filing. | Johnson asserts good faith and feasibility given tax relief goals, business stability, and repayment plan. | Plan found to be proposed in good faith and feasible. |
| Whether Creditor is entitled to a higher interest rate than 5.25%. | Creditor argues for a higher rate based on creditworthiness and terms of financing. | Debtor argues for 5.25% per plan; Till supports using prime rate with modest risk adjustment. | Creditor is limited to 5.25% as provided in the plan. |
Key Cases Cited
- Till v. SCS Credit Corp., 541 U.S. 465 (U.S. 2004) (establishes use of national prime rate adjusted for risk in setting Chapter 13 interest)
- Deans v. O'Donnell, 692 F.2d 968 (4th Cir.1982) (totality of the circumstances test for good faith in Chapter 13)
- Neufeld v. Freeman, 794 F.2d 149 (4th Cir.1986) (factors for good faith in bankruptcy filings)
- In re Grandfather Mountain Ltd. P'ship, 207 B.R. 475 (Bankr.M.D.N.C.1996) (risk-based interest adjustments in bankruptcy context)
- In re Oaks Partners, Ltd., 135 B.R. 440 (Bankr.N.D.Ga.1991) (formula approach to interest rate in Chapter 13)
- In re Sherwood Square Assocs., 107 B.R. 872 (Bankr.D.Md.1989) (premium to interest rate reflecting risk of nonrecovery)
- In re Fowler, 83 B.R. 39 (Bankr.D.Mont.1987) (modest risk adjustment to interest appropriate in Chapter 13)