Unimpaired Unsecured Creditors in Solvent-Debtor Chapter 11 Case Entitled to Postpetition Interest, Presumably at Contract or Default Rate

Summary

This article discusses the recent Ninth Circuit decision addressing the solvent-debtor exception and whether unimpaired, unsecured creditors of a solvent debtor are entitled to postpetition interest at the contract or federal judgment rate. Perhaps given the relative rarity of solvent-debtor cases during the nearly 45 years since the Bankruptcy Code was enacted, a handful of recent high-profile court rulings have addressed whether a solvent Chapter 11 debtor is obligated to pay postpetition, pre-effective date interest (pendency interest) to unsecured creditors to render their claims unimpaired under a Chapter 11 plan, and if so, at what rate. This question was recently addressed by two federal circuit courts of appeals.