What Interest Rate Does the Chapter 13 Bankruptcy Trustee Pay on Secured Claims?

EXPLANATION OF THE TOPEKA DISCOUNT RATE

by Jan Hamilton, Standing Chapter 13 Trustee

  • The Discount Rate (Interest Rate) for chapter 13 bankruptcy cases filed in Topeka, Kansas, on or after March 1, 2009, is 4.75%.

This rate will typically be changed no more than once a month, on the beginning of the
month.

Beginning on July 1, 2004, we began using our version of the Till rate. [Till v SCS Credit Corporation, 541 U.S. 465, 124 S. Ct. 1951 (2004)]. We start with the Wall Street Journal Prime as reported by www.bankrate.com. We will adjust prime for new cases filed once per month on the 1st day of each month. We then add 1.5% to that rate as the risk factor. This rate has never been challenged but certainly, in the appropriate case, the risk factor might be higher or lower.

This rate was approved by Judge Karlin in In re Lowder, Case No. 05-44802, in a decision entered on August 14, 2006.

Another source of interesting information regarding prime rates is www.nfsn.com/library/prime.htm that will give you historical information on prime rates and other rates.

In our version of the Till case, was In re Smith, 310 B.R. 631D.Kan., 2004. Judge Robinson remanded the HAFC objections to bankruptcy court for a determination of the discount rate.  HAFC accepted the rate then being utilized by our office, so the issue was never actually litigated.

Prior to Till, 10th Circuit law was governed by In re Hardzog, 901 F.2d 858 (10th Cir. 1990) a Chapter 12 case. The rate was “market rate” and very difficult to apply. In almost a throw away line, the decision also said that the rate was contract rate if lower than market. The Honorable Janice M. Karlin ruled in Rossi, Case No. 06-41234, from the bench, that the Till rate applies across the board, to secured debt, even if the contract rate is lower. Also, see Lowder, above. (Exceptions to this are real estate debt, co-signed debt and, perhaps, obligations that are current as of the date of filing that are being paid in full with the contract rate.)

About Jill Michaux

Jill Michaux is a Kansas bankruptcy attorney. She can be found on Google+. She and her partner, Mark Neis, are Topeka's only board certified consumer bankruptcy law specialists.