Default Interest in Chapter 11: What Sagamore Partners Means for Lenders
Author: Steven Wilamowsky.; Laura E. Appleby.
Source: Volume 29, Number 02, November/December 2015 , pp.19-26(8)
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Abstract:
The question of when a secured creditor should receive default-rate interest in a bankruptcy proceeding can be a controversial one. Given that in most bankruptcy cases unsecured creditors are left with only a small recovery on account of their principal claims, the possibility that a secured creditor will receive payment in full not only with interest, but with default interest, often is an impetus for litigation. This article discusses secured creditors’ rights to default interest in bankruptcy, with particular focus on cases where a debtor proposes to fully reinstate a pre-bankruptcy loan agreement as part of its plan of reorganization.Keywords: secured creditors; default-rate interest; bankruptcy; cramdown; nonconsensual reinstatement of loan; JPMCC 2006-LDP7 Miami Beach Lodging, LLC, et al. v. Sagamore Partners, Ltd.
Affiliations:
1: Chapman and Cutler LLP; 2: Chapman and Cutler LLP.