IN RE: LaRon Andrew Jones Debtor (2025)

Chapter 13

OPINION AND ORDER SUSTAINING OBJECTION TO CONFIRMATION AND AWARDING ATTORNEY'S FEES AND EXPENSES

This matter is before the Court on the Objection to confirmation of the Debtor's Chapter 13 plan filed by Deutsche Bank National Trust Company ¹ [DE 37] (“Bank”) and the Debtor's Response to the Objection [DE 41]. The Court held a hearing on October 22, 2025, and took this matter under advisement.

This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (L) and (O). Accordingly, the Court has both the statutory and constitutional authority to hear and determine these proceedings subject to the statutory appellate provisions of 28 U.S.C. § 158(a)(1) and Part VIII (“Bankruptcy Appeals”) of the Federal Rules of Bankruptcy Procedure. This decision constitutes the Court's findings of fact and conclusions of law under FED. R. CIV. P. 52, made applicable to this contested matter by FED. R. BANKR. P. 7052. Regardless of whether specifically referred to in this decision, the Court has examined the submitted materials, considered statements and arguments of counsel, considered all of the evidence and reviewed the entire record of the case. Based upon that review, and for the following reasons, the Court hereby determines that the Debtor's proposed Plan does not meet the requirements for confirmation set forth in 11 U.S.C. § 1325(a), and that Bank's Objection to confirmation of the proposed Plan is sustained.

DISCUSSION OF BACKGROUND FACTS AND PROCEDUAL HISTORY OF THE CASE

The facts of this case are undisputed. Debtor commenced this Chapter 13 case on June 9, 2025, and Bank, a second mortgagee, filed its secured claim on August 18, 2025 in the total amount of $18,459.15 with a fixed annual interest rate of 8.75% based on its recorded deed of trust and supporting documents, including Debtor's payment history. [Claim 5-1] Both the Proof of Claim and Attachment indicate that “Debtor is responsible for ongoing taxes and insurance” and that the claim represents a “Total Debt Proof of Claim as the Loan Matured on 11/1/2019.” Id. The Mortgage Proof of Claim Attachment breaks down the debt, indicating the principal balance as $15,245.36, with interest of $2,474.76 plus fees and costs totaling $739.03. [ Claim 5-1, Part 2]

In due course Debtor filed a Chapter 13 plan [DE 12], proposing a weekly plan payment to the Chapter 13 trustee of $475 via payroll deduction. The plan proposes to pay Bank an arrearage of $18,530.28 ² at 0% interest, resulting in a monthly payment of $309, with the total claim to be paid in full through payments from the Chapter 13 trustee during the life of the plan. [DE 12, ¶6]³ Bank objected to confirmation of the plan as filed, contending that the plan fails to meet the requirements of 11 U.S.C. § 1325 and asserting that the plan proposes in bad faith improper treatment of Bank's claim. [DE 37] Suggesting to the Court a prime-plus interest rate and citing to Till v. SCS Credit Corp., 541 U.S. 465 (2004), Bank “objects to any plan filed in this case that does not propose to pay [Bank] at least 9.5% interest per annum.” Id. Further, Bank alleges that the plan fails to provide for maintenance of property taxes and hazard insurance, and that confirmation should be denied until the plan is amended to properly treat Bank's claim. Id.

Debtor filed a response to the Objection, pointing out that the plan includes the payment of two mortgages, and the first mortgage payment includes an escrow payment of property taxes and hazard insurance. [DE 41] Further, Debtor maintains that the facts of this case distinguish it from the facts set forth in Till as the collateral in this case is appreciating in value, unlike the vehicle at the heart of the Till dispute. Id. In addition, Debtor argues that because Bank will be paid in full over the life of the 5-year plan, a more appropriate rate of interest, if any, to provide adequate protection and to give Bank the time value of its money is a 5-year mortgage rate, which ranges from 4.875% to 5.540%. Id. Further, Debtor's counsel argued that because this is a fully matured loan, Bank has already received its interest and for this reason, the plan proposes 0% interest on the arrearage owed.

Based on these facts and the arguments of counsel, the Court next considers and determines the issues before it.

LAW AND ANALYSIS

Interest Rate

The starting point – and ending point – for any Chapter 13 plan confirmation determination is found in § 1325(a) of the Bankruptcy Code, which provides, as it pertains to the dispute at bar, as follows:

(a) [T]he court shall confirm a plan if —

(1) The plan complies with the provisions of this chapter and with the other applicable provisions of this title;

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(3) the plan has been proposed in good faith and not by any means forbidden by law;

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(5) with respect to each allowed secured claim provided for by the plan —

(A) the holder of such claim has accepted the plan;

(B) (i) the plan provides that —

(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim;

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(6) the debtor will be able to make all payments under the plan and to comply with the plan.

11 U.S.C. § 1325(a). At the core of the parties’ dispute is “the value” as set forth in (a)(5)(B)(ii). In order to achieve confirmation of this plan, the total plan payments made to the secured creditors must equal – or exceed – the value of their allowed secured claims. The Code does not expressly provide for the payment of interest to achieve “the value,” but courts recognize that

[a] debtor's promise of future payments is worth less than an immediate payment of the same total amount because the creditor cannot use the money right away, inflation may cause the value of the dollar to decline before the debtor pays, and there is always some risk of nonpayment. The challenge for bankruptcy courts reviewing such repayment schemes, therefore, is to choose an interest rate sufficient to compensate the creditor for these concerns.

Till, 541 U.S. at 474. The Till Court directs that often a bankruptcy court is required to “ ‘discoun[t] ․ [a] stream of deferred payments back to the[ir] present dollar value’ to ensure that a creditor receives at least the value of its claim.” Id., quoting Rake v. Wade, 508 U.S. 464, 472, n. 8 (1993) and citing to 11 U.S.C. §§ 1129, 1173, 1225, 1228 and 1325. A bankruptcy court “should aim to treat similarly situated creditors similarly, and to ensure that an objective economic analysis would suggest the debtor's interest payments will adequately compensate all such creditors for the time value of their money and the risk of default.” Id. at 477, citing 11 U.S.C. § 1322(a)(3) (“the plan ․ shall provide the same treatment for each claim within a particular class.”).

Further, the potential need to modify the loan terms to account for intervening changes in circumstances is also clear: On the one hand, the fact of the bankruptcy establishes that the debtor is overextended and thus poses a significant risk of default; on the other hand, the postbankruptcy obligor is no longer the individual debtor but the court-supervised estate, and the risk of default is thus somewhat reduced.

Id. at 475.

Against this backdrop, the Court first finds that Debtor's proposed Plan, providing for 0% interest to Bank on its secured claim, does not account for “the value” of Bank's allowed secured claim as contemplated under the Bankruptcy Code. The Court now turns to its analysis to determining an adequate discounted value of Bank's claim under the facts presented in this case.

A plurality of the Till Court concluded that a bankruptcy court might arrive at a discounted value by taking a “formula approach” wherein the court should first consider “the national prime rate, reported daily in the press, which reflects the financial market's estimate of the amount a commercial bank should charge a creditworthy commercial borrower to compensate for the opportunity costs of the loan, the risk of inflation, and the relatively slight risk of default.” Id. 478-79. Once this is discerned, the bankruptcy court must then “adjust the prime rate” to account for the risk of nonpayment posed by a bankruptcy debtor versus that of a solvent commercial borrower. Id. at 479. Such adjustment is generally interest of 1% to 3% and depends on factors such as “the circumstances of the estate, the nature of the security, and the duration and feasibility of the reorganization plan.” Id. at 479-80 (citations omitted). “[T]his requirement obligates the court to select a rate high enough to compensate the creditor for its risk but not so high as to doom the plan.” Id. at 480. Indeed, an interest rate can have a significant impact on the feasibility of a Chapter 13 plan. The burden is on the creditor to present evidence supporting a higher interest rate. Id. at 484-85.

In the aftermath of Till, most courts start the calculation with the U.S. Prime Loan Rate. Some courts, however, begin with the U.S. Treasury Interest Rate, which is also a “market rate,” reasoning that the Till decision never rendered the treasury rate obsolete as a matter of law. Farm Credit Servs. of Am., FLCA v. Topp (In re Topp), 75 F.4th 959, 963 (8th Cir. 2023) (collecting cases). The prime rate includes a risk premium to account for the effect of some type of risk, whereas the treasury rate is a risk-free rate for money. See April E. Kight, Balancing the Till: Finding the Appropriate Cram Down Rate in Bankruptcy Reorganizations After Till v. SCS Credit Corporation, 83 N.C.L. Rev. 1015, 1022 (2005) (citations omitted). Therefore, “the appropriate risk adjustment depends on the risk already accounted for in the starting rate.” In re Topp, 75 F.4th at 962, citing Kight at 1028.

At the core of the bankruptcy court's inquiry, however, is determining “the proper approach to satisfying the plan-confirmation requirement that secured creditors receive at least ‘the value, as of the effective date of the plan, of their claims. See [§ 1325 (a)(5)(B)(ii)]. That approach begins with risk-free or low-risk lending practices and then accounts for case-specific risk factors.” Id. (citing United States v. Doud, F.2d 1144, 1146 (8th Cir. 1989)).

The Court has examined post-Till case law from the Sixth Circuit, which leans towards the “prime-plus” calculation to determine the risk adjustment. See DaimlerChrysler Servs. North Am. LLC v. Taranto (In re Taranto), 365 B.R. 85 (B.A.P. 6th Cir. 2007) (remanded for determination pursuant to prime-plus-risk-factor rate) and In re Blanton, No. 10-60160, 2010 WL 4503188 (6th Cir. Oct. 29, 2010) (applying the prime-plus approach). The Sixth Circuit cases examined by the Court, however, like Till, all involved a debtor's attempt to cramdown a loan secured by an automobile.⁴ The Court finds, therefore, that these cases are fundamentally distinguishable from the case at bar, and that the facts and attendant reasoning set forth by the Eighth Circuit in In re Topp is more appropriately aligned with the facts before it.

As in the case now before the Court, the Topp case involved a dispute about the appropriate discount rate that should apply to the debtor's deferred payments on a claim arising from five loans secured by real estate. In re Topp, 75 F.4th at 960.⁵ Also as in the Topp case, Bank's claim is oversecured ⁶ , so the entire claim is “allowed.” Id. at 961, citing 11 U.S.C. § 506(a). The Topp Court reasoned that “[w]e see no legal significance to whether a court starts with a risk-free rate and adds full risk or starts with some-risk rate and adds some more. If the court properly follows the formula approach, the ultimate discount rate, not the starting point, is what matters.” Id. at 962-63. (citation omitted). Upon a review of the bankruptcy court's factual finding, the Circuit Court acknowledged that the bankruptcy court

considered the length of the proposed maturity period, the fact that [the bank's] claim was substantially over-secured, and the overall risk of nonpayment. It specifically noted that [bank's] claim was secured by real estate and that those ‘types of transactions are generally financed over a longer period of time which justifies use of the treasury bond as the base rate.’ In the end, the court approved a 4% rate – the treasury rate plus 2% for risk.

Id. at 963. The Circuit affirmed the bankruptcy court's judgment, finding that the creditor, by focusing on the starting rate rather than the ultimate rate, failed to show clear error on the part of the bankruptcy court “in its determination that a 4% rate was sufficient to ensure full payment on ‘the value, as of the effective date of the plan,’ of the secured claim.” Id.; see 11 U.S.C. § 1325(a)(5)(B)(ii).

One commentator endorsed the Topp decision as follows:

Topp involved oversecured real estate, which is an appreciating asset, while most chapter 13 cases deal with financed vehicles, which typically lack equity and are depreciating assets․ While the prime rate inherently carries risk, unlike the risk-free Treasury rate, it raises a question: Why should a debtor be required to account for risk twice?

Considering the higher interest rates [in today's economy], it would be reasonable to use a Treasury rate as a baseline, then add an additional one to three points to incorporate risk. Requiring debtors to account for risk twice might be excessive. The Treasury rate, coupled with a risk adjustment of one to three points, can provide a fair and balanced formula for interest-rate calculations. Notably, Till opined that whatever formula rate is used, the interest rate should not be so high as to doom the chapter 13 plan․

Michael Miller, Assessing In re Topp's Impact on Interest Rates for Secured Creditors, 43-May Am. Bankr. Inst. J. 14, 15 (2024) (citations and footnotes omitted).

The Court finds the Topp Court's reasoning to be sound under the facts of this case, and hereby finds that the starting point, or the “market rate,” under the formula approach for calculation of the appropriate interest rate is the U.S. Treasury Note five-year interest rate of 3.666%.⁷

The Court must now adjust the rate to account for the risk of nonpayment posed by the Debtor in this particular case. Applying the factors suggested by the Till Court, the Court first considers “the circumstances of the estate” as indicated on the Chapter 13 bankruptcy petition [DE 1, 11] and notes that, in addition to the two mortgages, Debtor has a priority IRS debt of $8,961.05 and student loan debt of $18,344.98. Including the tax liability and student loans, Debtor lists a total amount of unsecured debt of $26,347.11. Debtor has steady employment and has been employed for three years at an Amazon warehouse, and also earns additional income as a seller/distributer on Ebay. The circumstances of the bankruptcy estate as set forth in the Debtor's Petition and Schedules appear typical for debtors in this district and do not raise any particular concerns for the Court. This factor does not indicate that a higher interest rate is required to account for risk adjustment.

The Court next considers the nature of the security – in this case, real property. Unlike the case with an automobile, real property generally appreciates in value and the undisputed evidence in this case indicates that the Bank's claim is oversecured, with a significant amount of equity in the collateral. Because the escrow is paid through the first mortgage payment, there is adequate insurance on the property. The nature of the security in this case tips the scales in favor of a lower interest risk adjustment to the base rate.

The Court next looks at the duration and feasibility of the reorganization plan. The Debtor filed an Amended Plan on December 12, 2025 [DE 47], proposing to pay via payroll deduction $482 per week to the Chapter 13 trustee for distribution to creditors over a 5-year period. This includes a monthly payment on Bank's $18,459.15 claim at 0% interest, resulting in a payment of $309 to pay Bank's claim in full over the course of the Plan. Debtor's Schedule I indicates steady employment and income over at least the past three years [DE 11], lending support that Debtor's Plan will be successful.

A secured creditor may argue that a bankruptcy debtor may be a higher risk, but Justice Stevens in Till opined that because the debtor is now under a court-supervised plan, the risk of default is somewhat reduced. This is especially true if the debtor is on a court-ordered payroll control where the monthly payments are being garnished from his/her paycheck. Moreover, it is very unlikely that the debtor will take on more debt while in chapter 13, thus also decreasing the risk.

Miller, 43-Am. Bankr. Inst. J. at 15 (citing Till, 541 U.S. at 475-76, n.12).

The Court recognizes that this is the Debtor's third Chapter 13 case filed since 2019, with the two prior cases dismissed – one because the case exceeded five years, and the other dismissed for the Debtor's failure to make plan payments.⁸ The Court also notes that in the two prior cases, Debtor's Plans proposed to pay Bank's claim at 0% interest, yet Bank failed to object to either of those Plans. Upon examination of the payment history (beginning in 2014) attached to Bank's Proof of Claim #5-1, it is clear that the Debtor did not make regular and consistent payments until after his first Chapter 13 Plan was confirmed on April 30, 2019, and the payments continued for several years until just prior to dismissal of that case in July, 2024. The payment history confirms that the Bank substantially benefitted from court-supervised payments through the Debtor's prior Chapter 13 Plan, yet Bank argues that confirmation of the proposed Plan in this case should be denied, as the appropriate interest rate will render the Plan not feasible.

Based on the reasoning set forth above and the relative success in payment enjoyed by Bank in Debtor's prior 2019 case – which continued more than 5 years – in addition to the fact that Debtor proposes to pay into the current Plan via payroll deduction to the Chapter 13 trustee, the Court finds that the duration and feasibility of the Debtor's reorganization weighs in favor of a lower risk adjustment to the base rate.

The Till plurality suggested an adjustment of 1% - 3%, Till, 541 U.S. at 479-80 (citations omitted), and as set forth herein, the Court has determined that an adjustment on the lower end of that scale – between 1% and 2% – is appropriate. Therefore, the Court finds that a risk adjustment of 1.5% is proper in this case, and in order for Bank to receive “the value” of its claim pursuant to 11 U.S.C. § 1325(a)(5)(B)(ii), Bank's claim shall be paid through the Debtor's Chapter 13 Plan at an interest rate of 5.166% (the U.S. Treasury baseline rate of 3.666% plus the 1.5% risk adjustment).

Feasibility

The Court turns now to the confirmation requirement set forth in 11 U.S.C. § 1325(a)(6) which requires that “the debtor will be able to make all payments under the plan and to comply with the plan.” Bank argues that “it is reasonable to this Court to consider Debtor's prior bankruptcy filings in predicting whether the present case will result in a discharge.” [DE 44, ¶18]. Indeed, as the Court has already noted, although Debtor's 2024 Chapter 13 case was short-lived ⁹ , his 2019 case continued for more than 5 years and was dismissed for that reason, and not for Debtor's failure to pay consistently into the Plan. See Chapter 13 case 19-20674 [DE 105] and Chapter 13 case 24-26008 [DE 35]. At the hearing on Bank's objection to confirmation of the Plan, Debtor's counsel explained that there was a problem with Debtor's employer submitting the Plan payments to the Chapter 13 trustee, but that Debtor has now sent a new payroll order to his employer in order to correct the disruption in the submission of Plan payments.

“ ‘While the feasibility requirement is not rigorous, the plan proponent must, at a minimum, demonstrate that [d]ebtor's income exceeds expenses by an amount sufficient to make the payments proposed by the plan.’ ” In re Moore, 602 B.R. 40 (Bankr. E.D. Tenn. 2019). Upon examination of Debtor's Schedules I and J, the Debtor indicates a monthly net income of $2,541, but Schedule J fails to include the first and second mortgage payments. [DE 11] Debtor's Amended Plan [DE 47] proposes payment to the first mortgagee of $544.26 per month, plus an additional $317 per month payment on the first mortgage arrearage. The Plan proposes monthly payments to Bank on its second mortgage in the amount of $309 (at 0%). Considered together with the $2,541 net monthly income from Schedule J, the proposed Plan payment of $482 per week (approximately $1,928 per month) would seem to allow for an increase in monthly payments to Bank to account for the 5.166% interest on its claim. While neither the Court nor the Debtor can predict future developments that may occur over the next 60 months to interrupt the Debtor's progress or success in this case, Bank has not set forth any facts at this time to suggest that Debtor is decidedly unlikely to receive a discharge. For these reasons, the Court finds that the proposed Plan meets the feasibility requirements of § 1325(a)(6).

Good Faith

Bank also argues that the proposed Plan's failure to include an interest payment on its claim is prima facie evidence of bad faith [DE 44, ¶¶43-44], thus failing to meet the “good faith” requirement for confirmation set forth in § 1325(a)(3) which provides that the Plan must be proposed in good faith and not by any means forbidden by law. Although the Sixth Circuit has set forth a laundry list of factors to consider when making a determination of good faith, see Ed Schory & Sons, Inc. v. Francis (In re Francis), 273 B.R. 87, 91-92 (B.A.P. 6th Cir. 2002) (citations omitted), Bank's argument is solely focused on the modification of its secured claim. [DE 44, ¶¶ 43-44] As Bank pointed out and as the Court observes, Debtor's Counsel routinely submits Chapter 13 plans for its clients that propose 0% interest on mortgage claims. On this point the Court agrees with Bank and finds that this practice fails to make any effort to account for the discounted value of the secured creditor's claim in direct contravention of § 1325(a)(5)(B)(ii) and the Till plurality decision, and constitutes a lack of the necessary good faith on the part of the proponent of any such proposed plan pursuant to § 1325(a)(3). The Debtor's Plan, as proposed, thus does not meet these requirements for confirmation.

CONCLUSION

For the reasons set forth herein, the Court sustains Bank's Objection to confirmation of the Debtor's proposed Plan. Debtor is ordered to amend his Chapter 13 Plan to provide for 5.166% interest on Bank's claim. The Court further finds that, based on the facts and circumstances presented in this case and as a deterrent to counsel's practice in submitting such plans on behalf of its clients, Bank is entitled to recover reasonable attorney's fees and expenses incurred for bringing its Objection before the Court. While not controlling, the Court reviewed the Fannie Mae allowable fee reimbursement chart for servicers for “Objection to Plan” which the Court deems indicative of customary and reasonable mortgagee attorney fees. The chart provides for a maximum fee up to $700 for “legal services generally required in connection with the prosecution of an Objection to a Chapter 12 or 13 Plan, including communications with the servicer, legal research, preparation and filing of objection papers, negotiations with debtor's counsel and trustee, attendance at up to two hearings, and preparing a stipulation or order. This fee covers all Objections to the original Plan and up to two amended Plans, regardless of the number of Objections required, the number of debtors involved, or the number of [ ] mortgage loans involved.”¹⁰ The Court determines that the recoverable fee amount attributable to the Debtor in this case shall be $250. Such amount may also apply in future cases that warrant an objection from a lender to protect its interest in a case in which the proposed plan does not properly provide for the lender's claim, although this amount may be adjusted depending on the facts and circumstances presented in a particular case. Counsel for Debtor shall be liable for the remaining $450 as a deterrent to counsel for its current practice of submitting plans that provide 0% interest to lenders.

The Bankruptcy Court Clerk is directed to serve a copy of this Opinion and Order on the interested parties listed below.

FOOTNOTES

1.   The Creditor's official name, as indicated in the Objection, is Deutsche Bank National Trust Company, as Trustee for FFMLT Trust 2005-FFA Mortgage Pass-Through Certificates, Series 2005-FFA, by NewRez LLC d/b/a Shellpoint Mortgage Servicing. DE 37, ¶1.

2.   This amount appears to be Debtor's estimation of the amount of the arrearage, as Debtor's plan was filed on June 11, 2025, prior to the filing of Bank's claim on August 18, 2025.

3.   The fact that the loan matured in 2019, and the Debtor proposes to pay this claim in full over the life of the Plan brings this mortgage loan within the exception set forth in 11 U.S.C. § 1322(c)(2) to the anti-modification provision pertaining to home mortgages in 11 U.S.C. § 1322(b)(2). Thus, the anti-modification provision does not apply in this case, and the claim is subject to modification, or “cramdown,” from the parties’ original contractual agreement.

4.   The Court acknowledges that Bank's Counsel has cited several Tennessee bankruptcy court cases involving real property security for the proposition that the prime-plus interest rate is an appropriate baseline in this case, including this Court's decision in In re EAS Graceland, LLC, No. 20-24484, 2021 WL 1941658 (Bankr. W.D. Tenn. March 4, 2021), but the Court respectfully notes that such decisions are not binding on this Court, and/or were decided before the sound reasoning of the Topp case was at hand. See DE 44, ¶¶29-32.

5.   Although the Topp case was filed under Chapter 12, the Topp Court noted, and this Court agrees, that “Chapter 13 plan confirmation resembles that of a Chapter 12,” and that “[f]or our purposes, any distinction is immaterial.” Id. at 962 n.3.

6.   Debtor's Schedule A/B values the real estate at $210,800, with a first mortgage claim of $98,104.44 plus an arrearage of $18,978.45. The second mortgage claim – the claim at issue – is for a total claim of $18,459.15, which includes principal, interest and fees. Thus, there is a significant amount of equity in the property.

7.   As reported in the Wall Street Journal on December 18, 2025 at www.wsj.com/market-data/quotes/bond/BX/TMUBMUSDO5Y. This Court agrees that “[s]ince chapter 13 plans can last as long as five years, it would be ideal to use the five-year Treasury rate as opposed to the 20-year Treasury rate that was used in Topp.” Miller, 43-May Am. Bankr. Inst. J. at 15.

8.   See Chapter 13 case 19-20674 [DE 105] and Chapter 13 case 24-26008 [DE 35].

9.   Upon a review of the Debtor's 2024 case, it appears that a payroll deduction Order was entered directing Debtor's employer to deduct the plan payments pursuant to the proposed Plan, yet the case was thereafter dismissed for failure to pay. [DE 13, 35]. As noted below, at the hearing on Bank's Objection to confirmation in Debtor's 2025 case, Debtor's counsel asserted that Debtor's employer failed to submit the payments to the Chapter 13 trustee, but a new payroll deduction order has now been sent to the employer. The Court questions whether the 2024 Plan payments were also delinquent due to the employer's failure to submit the payments, leading to dismissal of that case.

10.   See https://www.fanniemae.com/content/guide_exhibit/allowable-bankruptcy-attorney-fees.pdf, visited December 22, 2025.

M. Ruthie Hagan UNITED STATES BANKRUPTCY JUDGE