570 B.R. 773
Bankr. S.D. Tex.2017Background
- Debtors Daniel and Daisy Turcotte filed Chapter 13; Daisy is a long‑term teacher earning about $69,940/year; Daniel is retired and unemployed.
- Debtors scheduled two vehicles securing Brazos Valley School Credit Union claims (Sienna and Tacoma) with aggregate equity of $14,100; they surrendered a third vehicle.
- Debtors’ Chapter 13 plan proposed to cram down the secured claims, paying them over 59 months at the contract interest rate of 1.99%.
- Credit Union objected, arguing Till requires a “prime plus” cramdown rate and the appropriate rate is prime (3.25 at petition) plus 2.00% risk = 5.25%.
- Court held a confirmation hearing, found Debtors low‑risk (wage order, job stability, current on plan, oversecured collateral), but concluded Till mandates using the national prime as the starting point and denied confirmation because the plan used 1.99% rather than the Till rate.
Issues
| Issue | Plaintiff's Argument (Debtors) | Defendant's Argument (Credit Union) | Held |
|---|---|---|---|
| Proper starting point for Till cramdown rate | Start with a truly risk‑free rate (e.g., 5‑year Treasury) and add risk; prime already includes risk | Start with national prime and add risk (prime+2%) | Court: use national prime as starting point (prime plus approach) in Chapter 13 cases |
| Effect of a contract rate lower than prime | Contract rate (1.99%) should govern or is adequate because it exceeds treasury and reflects low risk | Till analysis controls regardless of contract rate | Court: contract rate is irrelevant to cramdown — Till prime+ adjustment applies |
| Date to fix the prime rate | Use a sensible, administrable date (Debtors urged effective date concept implicitly) | Credit Union relied on petition or another relevant date | Court: use prime as of the plan’s effective date (used prime in effect at hearing as proxy) |
| Size of risk adjustment (basis points) | Low risk facts justify minimal adjustment (Debtors sought 0%) | Filing of bankruptcy and some unemployment justify larger adjustment (2.0%) | Court: risk premium of 1.0% appropriate here (prime 4.0% + 1.0% = 5.0%) |
Key Cases Cited
- Till v. SCS Credit Corp., 541 U.S. 465 (2004) (plurality adopting prime‑plus two‑step method for cramdown interest)
- Drive Fin. Servs., L.P. v. Jordan, 521 F.3d 343 (5th Cir. 2008) (Fifth Circuit adopts Till’s prime‑plus approach)
- Matter of Southland Corp., 160 F.3d 1054 (5th Cir. 1998) (contract rate governs postpetition interest for oversecured creditor absent inequity)
- Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (2015) (order denying confirmation of a Chapter 13 plan is not a final, appealable order)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (definition of a plan’s effective date for confirmation valuation)
- In re Texas Grand Prairie Hotel Realty, L.L.C., 710 F.3d 324 (5th Cir. 2013) (recognizes 1%–3% adjustment range to prime for confirmation valuation)