Does My Car Lender Get Paid Interest During My Chapter 13 Bankruptcy in Topeka, Kansas?

03 Oct Does My Car Lender Get Paid Interest During My Chapter 13 Bankruptcy in Topeka, Kansas?

The Chapter 13 Trustee in Topeka, Kansas, pays interest to car lenders and other allowed secured claims in chapter 13 plans. The current rate is 9.75% (for cases filed in September 2007).

The rate changes monthly on the first day of the month. It can be found on the trustee’s website, Once a rate is set for a case, it does not fluctuate.

A secured creditor is paid extra money, on top of his claim to compensate him for the delay in getting paid, which economists call the time value of money.

The Topeka discount rate is figured by using the Wall Street Journal Prime rate on plus 1.5% for a risk factor.

Topeka Till formula has never been challenged. U.S. Bankruptcy Judge Janice Miller Karlin approved the use of the Topeka Till rate in In re Lowder in 2006, although formula used for the rate was not disputed.

Interest paid in Topeka chapter 13 cases was fought over in In Re Smith, 310 B.R. 631 (D.Kan., 2004). The Bankruptcy Court chose the local custom used at the time, which was a formula based upon the five-year-treasury bill plus 3%, instead of the 18-21% contract interest rate requested by the creditor, Household Auto Finance Corporation. HAFC appealed.

While the Smith appeal was pending, the U.S. Supreme Court issued a ruling on chapter 13 interest in Till v. SCS Credit Corporation. The District Court send the Smith case was sent back to the Bankruptcy Court to decide the interest rate in light of the Till decision. The trustee changed his rate to the formula suggested in Till and HAFC dropped its objections.

Prior to Till, the controlling law in Kansas was in In Re Hardzog, 901 F.2d 858, (10th Cir., 1990), which ruled that a formula should be used to determine the interest rate paid to secured claims in Chapter 12 farm bankruptcy cases.

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Jill Michaux has helped Kansas consumers with debt problems for three decades. She and her partner, Mark Neis, are Topeka's only bankruptcy specialists, board certified in consumer bankruptcy law by the American Board of Certification. She help start the National Association of Consumer Bankruptcy Attorneys.

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