Farm Credit Services of America, FLCA v. William Howard Topp, aka Bill Topp, dba Bill Topp Farm, dba William Topp Farm

One of the requirements to be met in a plan of reorganization proposed under Chapter 12 of Title 11 is that a secured creditor be paid the “present value” of its claim as of the date the bankruptcy petition was filed. 11 U.S.C. § 1225(a)(5)(B)(ii). As in cases under Chapters 11 and 13, when payments under a Chapter 12 plan to a secured creditor occur over time, an appropriate interest rate should be applied to the principal amount to arrive at the required “present value” of the claim. See Till v. SCS Credit Corp., 541 U.S. 465, 473– 74 (2004). In Till, a Chapter 13 case, a plurality of this Court adopted a method to arrive at the appropriate interest on secured claims based on the state of the financial markets, circumstances of the bankruptcy estate, and the characteristic of the subject loan. 541 U.S. at 477. “Taking its cue from normal lending practices,” the Court adopted the “formula approach,” directing a bankruptcy court to determine first the widely-reported national prime rate at the time and, based on the circumstances, then adjust that rate based on risk, normally an enhancement between 1% to 3%. Id. at 480–81. The Question Presented is whether the formula approach method set forth in Till should also apply in Chapter 12 bankruptcy cases. Since Till, reported bankruptcy court decisions in Chapter 12 cases, including the Bankruptcy Appellate Panel [BAP] for the Tenth Circuit, reflect near unanimity—except for the decision at bar—in applying the