## Facts

- Ron Pair Enterprises, Inc. filed for Chapter 11 bankruptcy.
- The United States, through the Internal Revenue Service, held a nonconsensual federal tax lien securing unpaid withholding and Social Security taxes, penalties, and prepetition interest.
- The government filed a proof of claim asserting the tax debt was secured by the lien on the debtor’s real property and was oversecured.
- The debtor’s plan proposed paying the prepetition tax claim in full but did not provide for postpetition interest.
- The United States objected, arguing that 11 U.S.C. § 506(b) entitled it to postpetition interest as an oversecured creditor.
- The bankruptcy court rejected the government’s request for postpetition interest; the district court reversed; the Sixth Circuit reversed again, limiting § 506(b) postpetition interest to consensual liens.
- The Supreme Court granted review.

## Issues

1. Whether 11 U.S.C. § 506(b) entitles the holder of a nonconsensual oversecured lien (a federal tax lien) to postpetition interest.
2. Whether the statutory phrase “provided for under the agreement under which such claim arose” limits only “fees, costs, or charges,” or also limits “interest on such claim.”

## Decision

- The Supreme Court reversed the Sixth Circuit in a 5–4 decision.
- The Court held that § 506(b) allows postpetition interest on an oversecured claim regardless of whether the lien is consensual or nonconsensual.
- The Court interpreted the “agreement” language as modifying only “fees, costs, or charges,” not “interest on such claim.”
- The United States was entitled to postpetition interest on its oversecured federal tax lien.

## Legal Principles

- Under 11 U.S.C. § 506(b), the holder of an oversecured claim is entitled to “interest on such claim” without regard to whether the security interest arises by agreement or by operation of law.
- The statutory requirement that fees, costs, and charges be “provided for under the agreement under which such claim arose” applies to those items, not to postpetition interest.
- When statutory text is clear and its application does not produce absurd results or conflict with clearly expressed legislative intent, courts apply the text as written rather than importing limitations from prior practice or legislative history.

## Conclusion

The Court held that § 506(b) grants postpetition interest to all oversecured creditors, including those holding nonconsensual liens such as federal tax liens, while limiting additional fees, costs, and charges to those authorized by agreement and subject to reasonableness.


United States v. Ron Pair Enters., Inc., 489 U.S. 235 (1989)