Cottonwood Corners Phase V, LLC, a New Mexico limi

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	COTTONWOOD CORNERS PHASE V, LLC, 	No. 11-11-12663 JA
Debtor.
MEMORANDUM OPINION
Following a preliminary hearing held April 12, 2012 on the Motion for Relief from Stay
filed by Jefferson-Pilot Investments, Inc. (“JPI”) and oral argument on legal issues relating to the
Chapter 11 plan1 of Cottonwood Corners Phase V, LLC (“Cottonwood” or “Debtor”), the Court
directed the parties to submit briefs on the legal issue of whether the Debtor will be required to
pay interest on certain components of JPI’s claim in order to satisfy the requirements for
confirmation under 11 U.S.C. § 1129(b). JPI has raised other confirmation issues in its objection
to confirmation (See Docket No. 131), but this narrow legal issue is the only issue that the Court
has determined should be resolved prior to the final hearing on confirmation currently scheduled
for May 16 and 17, 2012.2
The Debtor commenced its bankruptcy case on June 8, 2011. The Debtor’s Third
Modification to Amended Plan of Reorganization Dated October 7, 2011 (“Third Plan
Modification”) (the Debtor’s proposed plan, as modified by the Third Plan Modification,
hereafter is called the “Plan”) separately calculates the interest arrears accruing from June 3,
2010 through the effective date of the Plan and proposes not to pay interest on this component of
JPI’s claim. JPI contends that the Plan’s failure to provide for payment of interest on JPI’s entire
secured claim as of the effective date of the Plan, including the pre-confirmation interest arrears
1The Court previously denied confirmation of the Debtor’s Amended Plan of Reorganization Dated October 7, 2011.
See Docket No. 110. Since then, the Debtor filed a third modification to its amended plan on March 3, 2012. See
Debtor’s Third Modification to Amended Plan of Reorganization Dated October 7, 2011 – Docket No. 119.
2 The final hearing on JPI’s Motion for Relief from Stay is scheduled at the same time.
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component of the claim, violates the provisions of 11 U.S.C. § 1129(b)(2)(A). The Debtor
counters that its plan meets the “fair and equitable” requirements of 11 U.S.C. § 1129(b)(2)(A)
under the third, alternative, standard of “indubitable equivalence” found in 11 U.S.C. §
1129(b)(2)(A)(iii).3 The Debtor asserts that payment of interest on the interest arrears
component of JPI’s claim would constitute payment of “interest on interest” contrary to the
applicable loan documents, and is not required by § 1129(b)(2)(A)(iii).
After consideration of the briefs submitted by the parties in light of the applicable case
law, the Court finds that the Debtor is required to include the pre-confirmation interest arrears as
part of JPI’s secured claim, and to pay interest on the full amount of the claim as of the effective
date of the Plan in order to satisfy the requirements of 11 U.S.C. 11 U.S.C. § 1129(b)(2)(A)(iii).4
DISCUSSION
The Plan separately classifies JPI’s claim as a secured claim. JPI voted to reject the Plan.
Therefore, pursuant to 11 U.S.C. 11 U.S.C. § 1129(a)(8), to confirm the Plan it must satisfy the
requirements of 11 U.S.C. 11 U.S.C. § 1129(b) as to JPI’s claim. The Debtor’s Third
Modification calculates JPI’s claim in three components: 1) the principal balance (“Principal”),
which includes accrued but unpaid interest as of June 2, 2010 (the date of default); 	2) cost
arrears (“Cost Arrears”) which includes all reasonable attorneys’ fees incurred by JPI prior to the
petition date, plus post-petition attorneys’ fees allowed by the Bankruptcy Court, plus all
3 The Court recognizes that satisfaction of one of the three, alternative prongs under 11 U.S.C. § 1129(b)(2)(A) does
not necessarily mandate a finding that the plan meets the more general fair and equitable requirement found in 11
U.S.C. § 1129(b)(1). See, e.g., In re Pacific Lumber Co., 584 F.3d 229, 245 (5 th Cir. 2009)(“Even a plan compliant
with these alternative minimum standards is not necessarily fair and equitable.”)(citation omitted); In re Sandy
Ridge Dev. Corp., 881 F.2d 1346, 1352 (5 th Cir. 1989)(acknowledging that technical compliance with §
1129(b)(2)(A) does not assure a finding that a proposed plan is fair and equitable.); In re Sunflower Racing, Inc.,
226 B.R. 673, 687 (D.Kan. 1998)(“[S]ection 1129(b)(2) sets forth only minimum standards of what is fair and
equitable.”)(citations omitted).
4Because the Court’s decision is limited to the narrow issue of whether the Debtor’s Plan must provide for payment
of interest on the interest arrears, the decision does not address whether other provisions of the Plan satisfy the fair
and equitable requirement necessary to confirmation under the cram down provisions of 11 U.S.C. § 1129(b).
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reasonable and necessary costs incurred under the terms of the original loan documents from
April 2010 through the effective date of the Plan; and 3) interest arrears (“Interest Arrears”)
which includes interest on the Principal at the rate of 9.86% (the applicable contract default rate
of interest) from June 3, 2010 through the effective date of the Plan, late fees in the total amount
of $1983.44, and interest on any Cost Arrears at the rate of 9.86% from the date such Cost
Arrears are paid by JPI until the effective date of the Plan, less any adequate protection payments
that the Debtor pays to JPI prior to the Plan’s effective date. See Third Plan Modification, ¶¶ a),
d), and e). 	The Debtor proposes to pay post-confirmation interest on the Principal and Cost
Arrears at the rate of 7% per annum, 5 but provides that the Interest Arrears will not bear interest.
Id. at ¶¶ a), b), and c). Instead, the Debtor proposes to pay the Interest Arrears in thirty equal
quarterly payments over a period of 7.5 years. Id. at ¶ c). This treatment fails to satisfy the
requirements of 11 U.S.C. § 1129(b)(2)(A).
Fair and Equitable: Indubitable Equivalence and Present Value.
The question before the Court is whether the provision in the Third Plan Modification
that proposes not to pay interest on the Interest Arrears provides JPI with the “indubitable
equivalent” of its secured claim under 11 U.S.C. § 1129(b)(2)(A)(iii). JPI asserts that in order to
satisfy the “indubitable equivalent” requirement under 11 U.S.C. § 1129(b)(2)(A)(iii), the Debtor
must comply with subsection (II) of 11 U.S.C. § 1129(b)(2)(A)(i), which requires the Debtor to
compensate JPI for the present value of its secured claim as of the effective date of the Plan. JPI
asserts that the Third Plan Modification fails to satisfy this requirement because the Plan, by
providing for payment of the Interest Arrears over a 7.5-year period without interest on the
5 The Court previously established the rate of 7% per annum as the appropriate discount rate to be applied to JPI’s
claim under the Plan as then formulated in order to comply with the requirements of 11 U.S.C. § 1129(b)(2)(A)(i).
See Memorandum Opinion, p. 33 (Docket No. 109).
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Interest Arrears, does not provide JPI with the present value of the Interest Arrears component of
its secured claim.
The Debtor counters that it need only satisfy the requirement of § 1129(b)(2)(A)(i), §
1129(b)(2)(A)(ii) or § 1129(b)(2)(A)(iii) for confirmation of its Plan over the objection of a
rejecting class of secured claims. According to the Debtor, this means that if confirmation is
sought pursuant to subsection (iii), subsections (i) and (ii) are simply inapplicable. The Debtor
argues that regardless of what § 1129(b)(2)(A)(i)(II) requires, the indubitable equivalent standard
of § 1129(b)(2)(A)(iii) is satisfied if the secured creditor receives the full benefit of its bargain
made at the inception of the contract. The Debtor reasons that if the Plan provides for payment
of JPI’s claim in full with interest in accordance with the applicable loan documents, including
interest on the unpaid principal balance accruing after default but before the Plan’s effective date
at the default rate of interest, JPI will receive the full benefit of its bargain made at the inception
of the contract. The Debtor “concedes that ‘indubitable equivalence’ requires that ‘present
value’ be calculated in determining whether the payout to the creditor provides it with the benefit
of its original bargain,” but contends that payment of interest in accordance with contract terms
satisfies this present value requirement. See [Debtor’s] Memorandum – Docket No. 137, p 5.
The Debtor maintains that if JPI were to receive interest on the Interest Arrears, it would not
receive the indubitable equivalent of its claim, but instead would receive a windfall by receiving
interest on interest contrary to the original bargain made by the parties.
The Court disagrees with the Debtor’s reasoning that JPI would receive the full benefit of
its bargain made at the inception of the contract if the Debtor were to pay interest on the
outstanding principal balance as provided by the contract between the Debtor and JPI. The
Debtor commenced this chapter 11 case on the eve of a foreclosure sale. The Debtor’s plan
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proposes to pay the Interest Arrears totaling over $600,000 on a loan in the original principal
amount of $3,500,000, over a period of 7.5 years without interest. Under the Plan, JPI is
precluded from foreclosing its mortgage so long as the Debtor complies with its obligations
under the Plan. The Third Plan Modification itself acknowledges that it seeks to modify the
terms of the loan documents.6 For JPI to receive the full benefit of its bargain made at the
inception of the contract, the Debtor could not accumulate interest arrears either pre- or post-
confirmation, JPI could accelerate its loan if arrearages accumulated, and upon acceleration JPI
could foreclose its mortgage lien. The Plan, by modifying the contract provisions of acceleration
and foreclosure based on pre-confirmation defaults to permit payment of Interest Arrears over a
period of 7.5 years, modifies the original bargain of the parties. Under the original bargain, JPI
would have been compensated for the Interest Arrears outstanding on the date of commencement
of this bankruptcy case immediately upon a then impending foreclosure sale of its collateral.
Further, the Court disagrees with the Debtor’s assertion that it may satisfy the indubitable
equivalent standard of § 1129(b)(2)(A)(iii) by making deferred cash payments to JPI in an
amount that is less than what it would otherwise be entitled to receive to compensate it for the
risk and delay of repayment on its claim pursuant to § 1129(b)(2)(A)(i)(II). The §
1129(b)(2)(A)(iii) indubitable equivalent standard should not be applied in a vacuum. While the
alterative subsections of 1129(b)(2)(A) are written in the disjunctive, so that subsection (iii)
“affords a distinct basis for confirming a plan,” the three subsections are not exhaustive of the
overarching fair and equitable requirement of § 1129(b)(1). In re Pacific Lumber Co., 584 F.3d
6The Third Plan Modification provides:
Except as specifically modified by the Modified Plan, all terms of the existing loan documents, mortgages
and agreements in place between the debtor and JPI as of the date prior to the first default by the Debtor
shall remain in place unchanged and unaltered. Except as modified by the Plan or this Modification, in the
event of any post-petition default by the debtor JPI shall be entitled to exercise all remedies it was entitled
to exercise pre-bankruptcy.
Third Plan Modification, ¶ a) (emphasis added).
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229, 246 (5th Cir. 2009). “The non-exhaustive nature of the three subsections is inconsistent with
treating them as compartmentalized alternatives.” Id. at 245-246. The Court, therefore,
concludes that the indubitable equivalent alternative under subsection (iii) is not satisfied by
deferred cash payments that would result in the creditor receiving less money to compensate it
for the risk and delay of repayment on its claim than it would otherwise receive under §
1129(b)(2)(A)(i).7 Cf. Pacific Lumber, 584 F.3d at 246 (stating that “Clauses (i) and (ii)
explicitly protect repayment to the extent of the secured creditors’ collateral value and the time
value compensating for the risk and delay of repayment[,]” and reasoning further that
‘[i]ndubitable equivalent’ is . . . no less demanding a standard than its companions.”); In re
Griffiths, 27 B.R. 873, 877 (Bankr. Kan. 1983)(stating that “[t]he Court does not believe
§1129(b)(2)(A)(iii) was intended as an alternative to the cash payment requirements of §
1129(b)(2)(A)(i)(II).”).8 Because the indubitable equivalent standard does not contemplate that
the Debtor may provide JPI with worse treatment than JPI would be entitled to receive under §
1129(b)(2)(A)(i)(II) to compensate it for the time value of money, the Court will examine
7 In reaching this conclusion, the Court is not suggesting that a debtor would fail to satisfy the indubitable equivalent
standard if the plan provided for a combination of deferred cash payments and other consideration that would
provide compensation for delay and risk equivalent to the value of the cash payments required by 11 U.S.C. §
1129(b)(2)(A)(i)(II). Further, the Court does not intend to suggest that a debtor can never proceed under the
indubitable equivalent standard if the plan proposes a type of treatment covered by subsections (i) or (ii). Compare
River Road Hotel Partners, LLC v. Amalgamated Bank, 651 F.3d 642, 648 and 652 (7 th Cir. 2011), cert. granted by
RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S.Ct. 845, 181 L.Ed.2d 547 (2011)(observing that
“[n]othing in the text of Section 1129(b)(2)(A) directly indicates whether subsection (iii) can be used to confirm
every type of reorganization plan or only those plans that fall outside the scope of Subsections (i) and (ii)[,]” but
rejecting debtor’s argument that a plan could qualify for treatment under subsection (iii) even if the proposed
treatment would otherwise fall (and fail) under subsections (i) and (ii)) with In re Philadelphia Newspapers, LLC,
599 F.3d 298, 305 and 311 (3rd Cir. 2010)(reasoning that, because § 1129(b)(2)(A) “is phrased in the disjunctive . . .
. a debtor may proceed under subsection (i), (ii), or (iii), and need not satisfy more than one subsection[,]” and
concluding that the “when a debtor proceeds under subsection (iii), Congress has provided secured lenders with no
right to credit bid at a sale of collateral.”).
8 See also, In re Swiftco, Inc., 1988 WL 143714, at *11 (Bankr.S.D.Tex. Oct. 5, 1988)(observing that “[o]ne method
of providing the indubitable equivalent of the return of the collateral is the payment in cash, over time, equivalent to
the value of the secured creditor’s full claim.”).
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whether § 1129(b)(2)(A)(i) would require the Debtor to pay interest on the Interest Arrears after
the effective date of the Plan.
Subsection (II) of 11 U.S.C. § 1129(b)(2)(A)(i) provides:
that each holder of a claim of such class receive on account of such claim deferred
cash payments totaling at least the allowed amount of such claim, of a value, as of
the effective date of the plan, of at least the value of such holder’s interest in the
estate’s interest in such property.
11 U.S.C. § 1129(b)(2)(A)(i)(II)(emphasis added).
This subsection contains a present value requirement.9 “When payment is deferred, ‘a creditor
receives the ‘present value’ of its claim only if the total amount of the deferred payments
includes the amount of the underlying claim plus an appropriate amount of interest to
compensate the creditor for the decreased value of the claim caused by the delayed payments.’”
In re Airadigm Communications, Inc. 547 F.3d 763, 768-769 (7th Cir. 2008)(quoting Rake v.
Wade, 508 U.S. 464, 472 n.8, 113 S.Ct. 2187, 124 L.Ed.2d 424 (1993)).
“Under 11 U.S.C. §506(b), the holder of an oversecured claim is allowed interest on his
claim to the extent of the value of the collateral . . . . [S]uch interest accrues as part of the
allowed claim from the petition date until the confirmation or effective date of the plan.” Rake v.
Wade, 508 U.S. 464, 471, 113 S.Ct. 2187, 2191, 124 L.Ed.2d 424 (1993) (emphasis added).
Because the value of the claim is calculated under 11 U.S.C. § 1129(b)(2)(A)(i)(II) “as of the
effective date of the plan,” the amount of JPI’s claim as of that date would include the Interest
Arrears component.
9See Sunflower Racing, 226 B.R. at 685 (“The Bankruptcy Code requires that with respect to a class of secured
claims which opposes a plan, the plan must provide that the holders of such claims receive on account of their
claims deferred cash payments totaling at least the allowed amount of their claims . . . . [and] further provides that
the present value of the deferred cash payments as of the effective date of the plan must total ‘at least the value of
such holder’s interest in the estate’s interest in the property.’”)(quoting 11 U.S.C. § 1129(b)(2)(A)(i)(II)); In re
Bloomingdale Partners, 155 B.R. 961, 974 (Bankr.N.D.Ill. 1993)(explaining that under § 1129(b)(2)(A)(i)(II), the
“payments under the plan must satisfy two requirements: (1) the simple, arithmetic total of the stream of payments
must at least equal the total claim, and (2) those payments must have a present value equal to the value of the
collateral.”).
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In Rake v. Wade, the Supreme Court considered in the context of a Chapter 13 case
whether the debtors were required under 11 U.S.C. § 1322(b)(5) to pay interest on pre- and post-
petition arrears in order to cure a default on an over-secured home mortgage. Rake v. Wade, 508
U.S. at 466. The arrears included unpaid interest. See Wade v. Hannon 968 F.2d 1036, 1037
(10th Cir. 1992), aff’d, Rake v. Wade, 508 U.S. 972, 113 S.Ct. 459, 121 L.Ed.2d 367 (1993).
Wade). The Supreme Court in Rake v. Wade relied on 11 U.S.C. § 1325(a)(5)(B)(i) and (ii), and
11 U.S.C. § 506(b), to reach its conclusion. Both Section 1325(a)(5)(B)(ii) and Section
1129(b)(2)(A)(i)(II) contain a present value requirement with respect to the amount of the
secured claim as of the effective date of the plan. Section 1325(a)(5)(B)(ii) requires, with
respect to secured claims, that “[t]he 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 allowed amount of the
claim.” Similarly, 11 U.S.C. § 1129(b)(2)(A)(i)(II) provides “that each holder of a claim of such
class receive on account of such claim deferred cash payments totaling at least the allowed
amount of such claim, of a value, as of the effective date of the plan of at least the value of such
holder’s interest in the estate’s interest in such property.” Pursuant to 11 U.S.C. §
1325(a)(5)(B)(ii), the Supreme Court determined that the mortgagee was entitled to interest on
pre-confirmation arrearages, which constituted a part of the mortgagee’s claim as of the effective
date of the plan, in order to provide the mortgagee with the present value of its claim. Rake v.
Wade, 508 U.S. at 472-43.
Further, whether the loan documents provide for interest arrears to be added to principal,
or otherwise provide for payment of interest on interest, is not determinative of what is required
to satisfy the indubitable equivalent requirement of 11 U.S.C. § 1129(b)(2)(A)(iii). 	Just as the
rate of interest contained in the loan documents is not relevant to the appropriate “discount rate”
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to be applied in order to provide the creditor with the present value of its claim, nor does the
method of calculating interest in the loan documents dictate what is required to provide the
indubitable equivalent of the secured claim. Under Rake v. Wade, an over-secured creditor is
entitled to “post-confirmation interest on mortgage arrears, irrespective of whether the agreement
giving rise to such claim was silent or state law prohibited the same.” In re Alvarez, 458 B.R.
645, 650-651 (Bankr.D.Puerto Rico 2011); Wade v. Hannon, 968 F.2d at 1042 (holding that an
over-secured mortgagee “is entitled to postpetition interest on arrearages and other charges even
if the mortgage instruments are silent . . . and state law would not require interest to be paid.”).
After Rake v. Wade, Congress enacted 11 U.S.C. § 1322(e) (providing that
“[n]otwithstanding subsection (b)(2) of this section and sections 506(b) and 1325(a)(5) of this
title, if it is proposed in a plan to cure a default, the amount necessary to cure the default shall be
determined in accordance with the underlying agreement and applicable nonbankruptcy law”) for
the express purpose of overruling Rake v. Wade. The Floor Statements made in connection with
the legislation enacting 11 U.S.C. § 1322(e) included the following remark:
This section will have the effect of overruling the decision of the Supreme Court
in Rake v. Wade, 508 U.S. 464, 113 S.Ct. 2187, 124 L.Ed.2d 424 (1993). In that
case, the Court held that the Bankruptcy Code required that interest be paid on
mortgage arrearages paid by debtors curing defaults on their mortgages . . . . This
had the effect of giving secured creditors interest on interest payments, and
interest on the late charges and other fees, even where applicable laws prohibits
such interest and even when it was something that was not contemplated by either
party in the original transaction.
H.R. 835, 103 rd Cong., 2nd Sess. (1994), 140 Cong. Rec. H10,752 (daily ed. October 4,
1994).10
10See also Alvarez, 458 B.R. at 651 (stating that “Section 1322(e) was enacted by the Bankruptcy Reform Act of
1994, Pub. L. No. 103-394, § 305, 108 Stat. 4106 (1994) to overrule the Supreme Court’s holding in Rake v.
Wade.”).
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No similar subsection has been enacted as part of Chapter 11. Thus, the reasoning in Rake v.
Wade remains instructive to the question of whether the Debtor is required by 11 U.S.C. §
1129(b)(2)(A) to pay interest on the Interest Arrears component of JPI’s claim. The fact that the
loan documents between the Debtor and JPI do not provide for “interest on interest” is an
insufficient measure of whether the Plan provides JPI with the present value of its claim. And
unless the Plan provides for JPI to receive the present value the total amount of its secured claim
as of the effective date of the Plan, including the Interest Arrears component of the claim, the
Debtor has failed to provide JPI with the “indubitable equivalent” of the claim.
The tax claim cases JPI cites likewise support the conclusion that interest arrears
accumulated up to the effective date of a chapter 11 plan become a part of the secured claim, and
that interest must be paid on the entire amount of the secured claim calculated as of the effective
date of the plan. See, e.g., In re Southern States Motor Inns, Inc., 709 F.2d 647, 650 (11 th Cir.
1983)(construing 11 U.S.C. § 1129(a)(9)(C), acknowledging that tax claimants must be provided
with deferred payments equivalent to the present value of their claims, and determining that “the
proper method of providing such creditors with the equivalent of the value of their claim as of
the effective date of the plan is to charge interest on the claim throughout the payment
period.”)(citations omitted); In re Marfin Ready Mix Corp., 220 B.R. 148, 164 (Bankr.E.D.N.Y.
1998)(finding that interest on interest may be allowed as part of an over-secured creditor’s
claim).11 The fact Southern States and S & P construe 11 U.S.C. § 1129(a)(9)(C) rather than 11
U.S.C. § 1129(b)(2)(A)(ii)(II) is not a distinguishing factor; the language of these code sections
is substantially similar. See 11 U.S.C. § 1129(a)(9)(C)(“the holder of such claim will receive on
11See also, In re S & P, Inc., 189 B.R. 159, 172 (Bankr.N.D.Ind. 1995), order aff’d by S & P v. Pfeifer, 189 B.R. 173
(N.D. Ind. 1995), aff’d, __ Fed.Appx.__, 78 F.3d 587 (7 th Cir. 1996)(Table)(reporting that “the majority of
bankruptcy courts has determined that when a debtor chooses to defer payment under 1129(a)(9)(C), the only
proper method for providing the creditor with an amount equal to the value of its claim as of the effective date of
confirmation of the plan is to charge interest on the claim throughout the payment period.”)(citations omitted).
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account of such claim regular installment payment in cash - - of a total value as of the effective
date of the plan, equal to the allowed amount of such claim.”); 11 U.S.C. §
1129(b)(2)(A)(ii)(II)(“each holder of a claim . . . receive on account of such claim deferred cash
payments totaling at least the allowed amount of such claim . . . ); In re Cornwall Personal Ins.
Agency, Inc., 308 B.R. 771, 776 (Bankr.N.D.Tex. 2003)(suggesting that the present value
analysis for tax claims under §1129(a)(9)(C) is equally applicable to the present value analysis
required under § 1129(b)(2)(A)(i)(II) because both statutory sections use the identical phrase:
“value, as of the effective date of the plan”); In re Gen. Dev. Corp., 135 B.R. 1008, 1012 n.5
(Bankr.S.D.Fla. 1991)(noting that “courts tend to treat the present value standard in [§
1129(a)(9) and §1129(b)(2)(A)(i)(II)] as virtually identical.”)(citations omitted).
In sum, the appropriate discount rate for calculating the present value of JPI’s secured
claim must be applied to the total amount of the claim as of the effective date of the Plan. 	Cf.
Marfin Ready Mix, 220 B.R. at 157 (explaining that “[a]n oversecured creditor is entitled to
receive interest pursuant to § 506(b) only until the effective date of the plan. At that time, the
accumulated interest becomes part of the creditor’s allowed secured claim and, pursuant to 11
U.S.C. § 1129, the plan must provide for payment to the creditor of at least the present value of
such allowed claim.”)(citing United Savings Ass’n of Texas v. Timbers of Inwood Forest, 484
U.S. 365, 377, 108 S.Ct. 626, 633-34, 98 L.Ed.2d 740 (1988)(remaining citations omitted)).
Thus, the Debtor must pay interest on the Interest Arrears as part of JPI’s claim to provide JPI
with the indubitable equivalent of its claim.
CONCLUSION
Under the indubitable equivalent prong of 11 U.S.C. § 1129(b)(2)(A), a debtor proposing
deferred payments to the creditor must pay the creditor the present value of its secured claim
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calculated as of the effective date of the plan. JPI’s secured claim as of the effective date of the
Plan includes the Interest Arrears component of its claim; consequently, to provide JPI with the
indubitable equivalent of its secured claim the Debtor must apply a present value factor to the
entire claim, including the Interest Arrears. Because the Debtor’s plan, which proposes that the
Interest Arrears will not bear interest and will be paid over a period of 7.5 years, the Court finds
that the Plan as currently formulated does not provide JPI with the indubitable equivalent of its
secured claim.
__________________________________________
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
Date entered on docket: 	May 4, 2012
COPY TO:
Daniel J Behles
Moore, Berkson & Gandarilla, P.C.
Attorney for Debtor
P.O. Box 7459
Albuquerque, NM 87194
Faye B. Feinstein
Lauren Natchinson
Quarles & Brady LLP
Attorneys for JPI
300 N. LaSalle Street, Suite 4000
Chicago, IL 60654
William R. Keleher
Modrall, Sperling, Roehl, Harris & Sisk, P.A.
Local Counsel for JPI
PO Box 2168
Albuquerque, NM 87103
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