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In re Fraser
Citations: 184 B.R. 414; 34 Collier Bankr. Cas. 2d 130; 1995 Bankr. LEXIS 1033; 1995 WL 449803Docket: Bankruptcy No. 2-95-00011
Court: United States Bankruptcy Court, D. Connecticut; July 21, 1995; Us Bankruptcy; United States Bankruptcy Court
An objection was raised by the City of Hartford regarding a provision in David K. Fraser's Second Amended Chapter 13 Plan concerning real estate tax liens on his commercial property at 365-367 Albany Avenue. The tax claims total $17,712, comprising $15,463 in principal and $2,249 in accrued interest at an 18% statutory rate. Fraser's plan proposes to pay the tax claim over five years at a 9% interest rate on the principal only, with no interest on the accrued interest. While the City agrees on the 9% rate, it argues that post-confirmation interest should also apply to the accrued interest, citing Section 506(b) of the Bankruptcy Code, which allows for interest to be charged on secured claims when the property value exceeds the claim amount. Fraser contends that Connecticut law prohibits municipalities from charging interest on unpaid tax interest, and this should apply in bankruptcy as well. The court finds that the City's objection is valid, but not for the reasons it asserted. The court emphasizes that to exercise cramdown rights under Section 1322(b)(2), the debtor must ensure that the total payments equal the present value of the pre-confirmation tax claim, including any interest, over the payment period. On June 21, 1995, the court confirmed the debtor's plan but noted that if the City’s objection was sustained, Fraser agreed to amend the plan to increase payment amounts accordingly. The objection is sustained, and the debtor has 14 days to submit an amended plan. The relevant sections of the Bankruptcy Code cited include Section 506(b), which allows for the accrual of interest on secured claims, and Section 1322(b)(2), which permits modification of secured claim rights in a plan.