Argument of Speaker
Mr. Speaker: The opinions of the Court in two cases will be announced by Justice Stevens.
Argument of Justice Stevens
Mr. Stevens: In Till against the SCS Credit Corporation the case comes to us from the Seventh Circuit, it is a Chapter 13 bankruptcy case.
In what is known as the cram down option, a plan allowing the debtor to retain possession of an asset securing a creditor’s allowed claim can be approved over the objection of the creditor if the plan provides that the creditor will receive the value of the asset as of the date of the plan.
Normally that means that the plan will provide for a stream of installment payments that add up to the value of the asset plus interest.
The question in this case is how bankruptcy judges should set the interest rate.
Should they start with the rate that the debtor agreed to pay when he purchased the asset, in this case 21%, and place the burden on the debtor of proving that a lower rate is appropriate, because the plan cannot be approved without approval of the judge who must find that the plan is feasible and will likely succeed?
Or should they start with the prime rate, in this case 8%, and place the burden on the creditor of establishing how great an operate adjustment should be made?
A third possibility consistent with the statutory text would be to ignore the risk of default entirely and just use the prime rate.
This is a question on which many judges have disagreed and written at a great length.
We have done so as well.
Four of us, Justices Souter, Ginsburg, Breyer, and I, have concluded that we should presume that an approved plan will succeed.
Justice Scalia joined by the Chief Justice and Justices O’Connor and Kennedy, agree with the Seventh Circuit and would endorse the presumptive contract rate.
Because Justice Thomas analysis is closer to ours than to the dissenters, he joins the judgment reversing the Court of Appeals.
