## Facts

- Ronald P. Milham and Benedetta Milham filed a Chapter 13 petition in April 1996.
- They owed Key Bank $3,163.07 under a retail installment contract secured by a 1991 Lincoln Town Car with a 9.5% contract interest rate.
- The vehicle’s value substantially exceeded the debt, making Key Bank an oversecured creditor.
- The proposed Chapter 13 plan provided Key Bank $3,000 plus 8.5% interest.
- Key Bank objected, arguing it was entitled post-confirmation to the 9.5% contract rate.
- The bankruptcy court confirmed the plan with an 8.5% rate; the Bankruptcy Appellate Panel affirmed; Key Bank appealed.

## Issues

1. Whether an oversecured creditor in Chapter 13 is entitled post-confirmation to the contract interest rate when that rate would allow recovery exceeding the present value of the allowed secured claim as of the plan’s effective date.

## Decision

- The Second Circuit affirmed.
- The court held that an oversecured creditor is not automatically entitled post-confirmation to the contract rate if it would provide more than the present value of the allowed secured claim.
- The 8.5% plan interest rate was upheld.

## Legal Principles

- Bankruptcy law distinguishes prepetition interest, pendency interest, and plan interest; plan interest is governed by Chapter 13 confirmation standards rather than contract terms.
- Under Chapter 13 cramdown, the plan must provide payments with a present value equal to the creditor’s allowed secured claim as of the plan’s effective date.
- Section 506(b) does not require that an oversecured creditor receive the contract interest rate throughout the plan term when present value is otherwise satisfied.
- Post-confirmation interest may be set to prevent overcompensation beyond the present value of the secured claim.

## Conclusion

In Chapter 13, oversecured status does not entitle a secured creditor to the contract interest rate after confirmation; the plan need only provide an interest rate that yields the present value of the allowed secured claim as of the plan’s effective date.


Key Bank Nat'l Ass'n v. Milham (In re Milham), 141 F.3d 420 (2d Cir. 1998)