In re: William Howard Topp
- Summarized by Jaden Banks , Nyemaster Goode P.C.
- 1 year 5 months ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 22-2577 (8th Circuit, Aug 02,2023) Published
- Tag(s):
-
- Ruling:
- The Eighth Circuit Court of Appeals held that the cram down provision of Section 1225(a)(5)(B)(ii) requires the bankruptcy court evaluate the ultimate risk of nonpayment, therefore courts using a formula based approach to determine present value may start with a risk-free rate, like the twenty-year treasury bond rate, or the some-risk rate, like the national prime rate, and adds some more for an appropriate risk adjustment. The ultimate discount rate, not the starting point, is what matters.
- Procedural context:
- The Debtor, William Topp, filed for bankruptcy relief under Chapter 12 of the Bankruptcy Code. His Chapter 12 plan proposed to cram down Credit Services of America's $595,000 secured claim. Credit Services of America (the "Creditor") objected to its proposed treatment, but the bankruptcy court for the District of Iowa confirmed the plan. The Creditor appealed to the District of Iowa, which affirmed the bankruptcy court. The Creditor appealed to the Eighth Circuit Court of Appeals, which also affirmed.
- Facts:
- The Creditor held an over secured claim in the Debtor's real estate. The Debtor proved unable to obtain the Creditor's acceptance of his Chapter 12 plan and he refused to surrender his property to the Creditor. The Debtor then proposed to cram down the Creditor's claim by providing payments over a twenty-year repayment period and he proposed to provide for the present value of future payments by using the twenty-year treasury bond rate of 1.87% with an added 2% risk adjustment. The Creditor objected and proposed that the present value payment start with the national prime rate of 3.25% also with a 2% risk adjustment. The bankruptcy court found, after rounding up the Debtor's proposed rate, that 4% was appropriate and it confirmed the plan.
- Judge(s):
- GRUENDER, ARNOLD, and KELLY
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