Facts:
Debtor owed $4894.89 on a truck worth only $4000 at time of Chapter
13 filing. Secured claim limited to $4000 and the balance was
unsecured. Original contract called for 21% per year interest. The
debtor proposed their plan w/ 9.5% interest per year that was the
“prime-plus” rate.
Issue:
What is the correct interest rate to apply?
Holding:
Look to the national prime rate and allow the bankruptcy court to
adjust accordingly. If a “eye-popping” interest rate is
necessary, then the plan probably should not be confirmed.
Analysis:
§1322(b)(2) allows the court to modify the rights of any creditor
whose claim is secured by any interest other than real property that
is the debtor’s principal residence. We reject the coerced loan,
presumptive contract rate, and cost of funds approaches.
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