Interest rates on secured claims have increased (again) since my last post.
Prime Interest Rate: As you know, the “Till” interest rate on secured claims being paid through the plan is the prime rate of interest plus a risk factor of one to three points. Here is a rundown on the most recent changes in the prime interest rate as published by the Wall Street Journal (WSJ):
September 21, 2022: 6.25%
November 2, 2022: 7.00%
December 14, 2022: 7.50%
February 2, 2023: 7.75%
In the EDKY, secured claims that are not specifically provided for in the plan are treated as secured in full with interest payable at the rate of prime plus two points (which would be 9.75% at present). See section 3.6 of Local Form 3015-1(a), Chapter 13 Plan. That often makes a plan not feasible, which then forces the debtors and their attorneys to review the claim and determine its appropriate treatment in the plan.
IRS Interest Rate: The rate of interest to be paid on secured federal tax claims has also been fluctuating. The rates change quarterly and are determined as of the date of confirmation of a plan. Recent rates are as follows:
July through September 2022: 5%
October through December, 2022: 6%
January through March, 2023: 7%
Kentucky Department of Revenue (KDR) Interest Rate: The KDR Commissioner reviews the interest rate charged on tax liabilities annually and adjusts the rate as necessary. Rates for 2022 and 2023 are as follows:
Rate of Interest on Tax Claims in General: Keep in mind that according to section 511 of the Bankruptcy Code, the rate of interest on any tax claim is the rate determined under applicable nonbankruptcy law. In other words, the interest rates on IRS and KDR secured tax claims are the respective statutory rates and cannot be modified in the plan. The rates are determined as of the calendar month in which the plan is confirmed.