In re Till (301 F.3d 583, 2002)

RIPPLE, Circuit Judge.

Lee and Amy Till filed for bankruptcy protection under Chapter 13. SCS Credit Corporation, a secured creditor, objected to confirmation of the Tills’ Chapter 13 plan on the ground that the interest rate SCS would be paid under Chapter 13’s “cramdown” provision, see 11 U.S.C. § 1325(a)(5) (A) (ii), was insufficient. The bankruptcy court confirmed the plan over SCS’ objection; it held that the proper interest rate was the prime rate plus a risk adjustment of 1.5%. SCS appealed. The district court reversed the bankruptcy court’s decision; it concluded that the “coerced loan” theory applied, and, consequently, that the interest rate should be based on what SCS would receive for a loan of similar risk and duration. The district court stayed remand of its order pending the Tills’ further appeal to this court. For the reasons set forth in the following opinion, we vacate the judgment of the district court and remand the case for further proceedings with instructions.

I

BACKGROUND

Lee and Amy Till jointly filed for bankruptcy protection under Chapter 13. SCS Credit Corporation was the only creditor to object to confirmation of the Tills’ amended Chapter 13 plan. SCS is a secured creditor and holds a security interest in an automobile. The vehicle was valued at $4,500. SCS is a sub-prime lender, which means that it services borrowers with credit histories too poor to qualify for prime-rate auto loans. The Tills are such borrowers. The interest rate on the Tills’ loan was 21%. The Tills’ plan invoked the “cramdown” provision of Chapter 13.

Under Chapter 13’s cramdown provision, a bankruptcy plan will be confirmed over the objection of a secured creditor if the creditor retains its lien on