Rake v. Wade, 508 U.S. 464 (1993)

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certiorari to the united states court of appeals for the tenth circuit

No. 92-621. Argued March 22, 1993—Decided June 7, 1993

At the time they initiated separate Chapter 13 bankruptcy proceedings, petitioners, two pairs of debtors, and another married couple were in arrears on long-term promissory notes held by respondent Wade, which were secured by the debtors' home mortgages and did not provide for interest on arrearages. The value of the residence owned by each pair exceeded each note's outstanding balance, making Wade an oversecured creditor. In their Chapter 13 plans, the debtors proposed to make all future payments due on the notes and cure the default on the mortgages by paying off the arrearages without interest. Wade objected to each plan on the ground that he was entitled to interest and attorney's fees, but the Bankruptcy Court overruled the objections, and the District Court affirmed. The Court of Appeals reversed, holding that 506(b) of the Bankruptcy Code entitled Wade to postpetition interest on the arrearages and other charges, even if the mortgage instruments were silent on the subject and state law would not require interest to be paid.

Held: Wade is entitled to preconfirmation and postconfirmation interest on arrearages paid off under petitioners' plans. Pp. 467-475. (a) Three interrelated Bankruptcy Code provisions determine whether Wade is entitled to interest. Section 506(b) provides holders of oversecured claims with an unqualified right to postpetition interest, regardless of whether the agreement giving rise to the claim provides for interest, United States v. Ron Pair Enterprises, Inc., 489 U. S. 235, 241, until a plan's confirmation date. Section 1322(b)(2) prohibits debtors from modifying the rights of home mortgage lenders, while 1322(b)(5) authorizes debtors to cure any defaults on a long-term debt and maintain payments on the debt for the life of the plan. Finally, 1325(a)(5) states that "with respect to each allowed secured claim provided for by the plan," a plan may be confirmed if, inter alia, the holder of the claim retains the lien, 1325(a)(5)(B)(i), and the value of the property distributed under the plan on account of such claim is not less than the claim's present dollar value as of the confirmation date, 1325(a)(5)(B)(ii). Pp. 467-470. (b) Under 506(b)'s clear language, Wade is entitled to preconfirmation interest on the arrearages. That section directs that postpetition interest be paid on all oversecured claims, Ron Pair, supra, at 245, and

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