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Is the Till interest rate universally applicable to all Chapter 13 Bankruptcies in Michigan?

In Horny (E.D. Mich 2011), Judge Ludington ruled that not all contract interest rates can be crammed down to the Till rate. Ludington held that the Till rate of cramming or reducing interest in a secured obligation is not a universal rule.

Ludington followed the Till holding – maintaining that an interest rate may be adjusted higher to protect a creditor from the risk of nonpayment – provided this rate isn’t too high to impede a plan’s success. Extreme or high risk to a creditor mandates that a “markedly higher” interest rated be allowed.

Ludington cautioned that interest can be adjusted – “but not so high as to doom the plan”. Ludington relied on the Till plurality opinion and held that when “the likelihood of default is so high as to necessitate an eye-popping interest rate, the plan should not be confirmed”.

Horny stands for the proposition that the Till rate or “cram down” interest rate is not a fixed number. The allowable interest rate is determined by the facts on a case by case basis.

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