Narrative Opinion Summary
In this bankruptcy case, the City of Hartford objected to a provision in the debtor's Chapter 13 Plan concerning the treatment of real estate tax liens on a commercial property. The debtor's plan proposed to repay the tax claim, which included principal and accrued interest, over five years at a 9% interest rate on principal only, with no interest on the accrued interest. The City agreed to the 9% rate but insisted that post-confirmation interest should also apply to the accrued interest, invoking Section 506(b) of the Bankruptcy Code, which allows interest on secured claims when the property value exceeds the claim amount. The debtor argued that Connecticut law prohibits charging interest on unpaid tax interest, suggesting that this prohibition should extend to bankruptcy proceedings. The court found the City's objection valid, highlighting the requirement under Section 1322(b)(2) for the debtor to ensure payments equate to the present value of the entire tax claim, including interest. Although the court confirmed the debtor's plan, it required an amendment to increase payment amounts if the objection was sustained, granting the debtor 14 days to submit the amended plan.
Legal Issues Addressed
Interest on Secured Claims under Bankruptcy Code Section 506(b)subscribe to see similar legal issues
Application: The court addressed the issue of whether post-confirmation interest should apply to accrued interest on secured tax claims.
Reasoning: The tax claims total $17,712, comprising $15,463 in principal and $2,249 in accrued interest at an 18% statutory rate. 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.
Modification of Secured Claims under Bankruptcy Code Section 1322(b)(2)subscribe to see similar legal issues
Application: The court emphasized the requirement for the debtor to ensure that total payments under a Chapter 13 plan equal the present value of the pre-confirmation tax claim, including any interest.
Reasoning: 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.
Municipal Tax Interest under Connecticut Lawsubscribe to see similar legal issues
Application: The debtor argued that Connecticut law prohibits municipalities from charging interest on unpaid tax interest, which should apply in the bankruptcy context.
Reasoning: Fraser contends that Connecticut law prohibits municipalities from charging interest on unpaid tax interest, and this should apply in bankruptcy as well.