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Thursday April 28, 2011
Attorneys are required to attend Continuing Education Classes in order to maintain their license.
April 28, 2011 the Orange County Bar Association April meeting was on A Meeting on Cram Down Interest Rates.
If you are considering a Chapter 13, and you have a car payment with a high interest rate, your attorney may advise you of the possibility on “cramming down” or decreasing the interest rate the lender is charging you on your car loan (or other personal property loans you may have).
In 2004 the US Supreme Court ruled in Till v SCS Credit Corp that the correct method for determining the interest rate for a secured creditor over the life of a loan in a Chapter 13 was the National Prime Rate + a risk factor, which depended upon the creditworthiness the debtor, or the “formula rate.”
In other words, if you are paying 21% rate on your car loan, you may filed a Chapter 13, and modify your interest rate to the Prime rate (let’s say 3%) plus 1% to 3% for the added risk involved.
Thursday’s class went beyond this basic concept, and discussed how to modify an interest rate of a “shopping center” that filed a Chapter 11 bankruptcy. A much more complex set of facts that involved expert witnesses, cost of funds, comparable loan rate, Treasury rate, presumptive contract rate, the value of loan covenants, additional basis points. The Court finally decided a “blended interest” rate was the proper interest rate to charge the debtor, which would hopefully make the creditor whole.
Hey, the class left my head spinning. However, that is the purpose of Continuing Education classes for attorneys, not only to brush up their skills, but to lead them down the road to new ideas. While, I do not do Chapter 11 bankruptcies, I have expanded the scope of my thinking as to the “Till” rate, and the modification of interest rates.
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- Law Offices MJ Mann Bankruptcy Attorney
- 2706 Artesia Blvd, Suite BK
- Redondo Beach, CA 90278
- 310.376.9865
