NACBA / Debtors Fail To Win Interpretation Battle In 10th Circuit Over Interest On 910 Vehicles

The National Association of Consumer Bankruptcy Attorneys (NACBA) along with a number of Debtors (and their bankruptcy attorneys) took their argument over whether secured claims, which cannot be crammed down under the 910-day period preceding the filing of a bankruptcy, are "allowed secured claims" under 11 U.S.C. § 1325(a)(B)(ii) entitling the creditor to interest pursuant to the Supreme Court's prior opinion in Till v. SCS Credit Corp, 541 U.S. 465, 469 (2004).

In the consolidated cases before the United States Court of Appeals, 10th Circuit the Debtors has argued before the Bankruptcy Court, the BAP and the 10th Circuit that as a result BAPCPA a creditor who has a claim secured by a 910 vehicle is not entitled to interest at all because a 910 car claim is not an "allowed secured claim" within the meaning of 11 U.S.C. § 1325(a)(5).  Alternatively, they argued that the requirement to pay interest is not mandatory with the Bankruptcy Court in this regard.

The Debtors prevailed in the Bankruptcy Court, but they did not prevail before the 10th Circuit.

The 10th Circuit ruled that although 11 U.S.C. § 506(a) bifurcation of a claim into secured and unsecured portions is no longer available if the property was purchased or financed within 910 of the bankruptcy filing, the full amount owed is an "allowed secured claim" for purposes of 11 U.S.C. § 1325(a)(5), and the Bankruptcy Court must provide the creditors involved the present value of the claim, which includes interest.  The 10th Circuit also ruled that interest is required on the entire claim, and not just that portion that would be secured except for the 910 day limitation.

Although the 10th Circuit referred to some prior collateral decisions on its part, this really was a case of first impression for the Court.  It represented a gallant effort on the part of these Debtors, their bankruptcy attorneys and NACBA, but in the end the argument did not work.  Where the case goes from here is unclear.