March 20, 2008
5th Circuit Confirms that Till is Still Alive and Applies to "910 Claims"
Drive Financial Services v. Jordon (In re Jordon), --- F.3d --- (5th Cir. Mar 2008)
Issue: Where creditor holds a "910 Claim," and the debtor chooses to retain the vehicle, may the chapter 13 plan reduce the contract interest rate to a current "reasonable" rate?
Holding: Yes, Till was not changed by BAPCPA.
Appeal from Bankruptcy Court, Texas.
Opinion by Garwood
The debtor proposed a chapter 13 plan which provided that the 910 secured creditor would be paid in full with 6% interest. The contract rate was 17.95%. The bankruptcy court modified the rate to 7.5% based on Till, i.e., the prime rate plus an additional amount for the risk, and confirmed the plan. The 5th Circuit allowed a direct appeal.
The 5th Circuit affirmed. It rejected the creditor's argument that since Till was a bifucation case, it does not apply post-BAPCPA to a 910 claim which cannot be bifurcated. The creditor also argued that Till should not apply because the Till opinion was a plurality opinion. The 5th Circuit disagreed and said that 1) the majority of the Till court agreed that the contract rate is not the presumptive rate in any event and 2) even if Till does not apply, the creditor still has only the right to the "value of its claim" under Section 1325(a)(5) and the bankruptcy court's amount was reasonable.
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