UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
FRANKLIN D. ROBERTS
DEBTORS CASE NO. 90-00616
OPINION AND ORDER
This matter is before the Court on the motion of Pikeville National Bank for relief from the automatic stay. By Order of this Court entered February 1, 1991, the stay in effect pursuant to 11 U.S.C.'362 was modified and lifted to the extent of allowing the bank to take steps to cancel the extended vehicle warranty and credit life insurance and disability insurance purchased by the debtors as a part of the retail installment contract. The remaining issues raised by the bank's motion concerning the interest rate to be allowed on its secured claim under the plan were reserved for ruling by the Court, and those issues will be disposed of herein.
The Chapter 13 plan confirmed in this case provides that the holder of an allowed secured claim shall receive interest on such claim at the rate of 10%, annual percentage rate. The bank maintains that it should have payment of the full amount of its secured claim plus interest thereon at 14.99% per annum, the contract rate. Case law in the 6th Circuit supports the bank's position.
In Memphis Bank & Trust Company v. Linda Gail Whitman, 692 F.2d 427 (6th Cir. 1982), the court held that under 11 U.S.C.'1325(a)(5)(B) interest should be assessed at the current market rate of interest used for similar loans in the region. Citing Memphis Bank, the court in In re Colgrove, 771 F.2d 119 (6th Cir. 1985) held that "the most equitable rate to establish...is the prevailing market rate of interest on similar types of secured loans at the time of allowance of the creditors claim and the confirmation of the plan in bankruptcy with a maximum limitation on such rate to be the underlying contract rate of interest." At 123. Use of the prevailing market as the appropriate interest rate to be applied to determine the present value of a creditor's allowed secured claim was upheld in an analogous Chapter 12 case, In re Kratz, 20 CBC 2d 929 (Bkrtcy S.D. Ohio 1988).
In view of the foregoing, it is the opinion of this Court that Pikeville National Bank should have payment of the allowed amount of its secured claim plus interest at the contract rate of 14.99% per annum, and the same is hereby so ORDERED.
This is a final order entered this ___ day of February, 1991.
John T. Hamilton, Esq.
Robert L. Devers, Esq.
Sidney N. White, Esq., Trustee