## Facts

- Chapter 13 debtors owed about $4,000 on a truck financed through a retail installment contract held by a subprime auto lender with a secured claim.
- The proposed plan retained the creditor’s lien and repaid the secured claim in installments with 9.5% interest.
- The 9.5% rate was calculated by starting with the national prime rate (8%) and adding a 1.5% risk premium to reflect nonpayment risk.
- The creditor objected, seeking the 21% contract rate as the cramdown rate.

## Issues

1. What interest rate must be used to discount deferred payments under 11 U.S.C. § 1325(a)(5)(B)(ii) so that a secured creditor receives the “value, as of the effective date of the plan,” of its allowed secured claim when the plan is confirmed over the creditor’s objection.

## Decision

- The Supreme Court reversed the court of appeals and remanded.
- A four-Justice plurality concluded that, in typical Chapter 13 consumer cases, the proper cramdown rate is the “prime-plus” (formula) rate.
- Justice Thomas concurred in the judgment, supplying the fifth vote to reverse, but would not require an added premium for default risk as a matter of statutory interpretation.
- Under the Court’s approach, the 9.5% rate used to confirm the plan was permissible.

## Legal Principles

- Section 1325(a)(5)(B)(ii) requires a plan confirmed over a secured creditor’s objection to provide deferred payments whose total present value is not less than the allowed amount of the secured claim.
- When payments are made over time, an interest rate must be applied to account for the time value of money and, under the plurality’s view, the risk of nonpayment.
- The preferred method in ordinary Chapter 13 consumer cases is a formula: begin with the national prime rate and add a risk adjustment based on case-specific factors, commonly within a modest range.
- Contract rates and market “coerced-loan” approaches were rejected by the plurality as administratively burdensome and as likely to overcompensate creditors relative to the statute’s present-value requirement.
- Under the formula approach, the creditor generally bears the burden to justify a higher risk adjustment than the debtor proposes.

## Conclusion

The Court held that Chapter 13 cramdown interest ordinarily should be set using a prime-plus formula—prime rate plus a case-specific risk premium—rather than the contract rate or a market coerced-loan rate, and it approved confirmation using the 9.5% formula rate on the secured auto claim.


Till v. SCS Credit Corp., 541 U.S. 465 (2004)