In General Electric Capital Corp. v. Future Media
Productions, Inc., the Ninth Circuit addressed the issue of
whether an oversecured creditor is entitled to the contracted-for
default rate of interest when the creditor has been paid in full
pursuant to an asset sale governed by § 363 of the Bankruptcy Code.
Despite prior precedent to the contrary, the court answered the
question in the affirmative. In its previous decision in Great
Western Bank & Trust v. Entz-White Lumber and Supply, Inc.
(In re Entz-White Lumber & Supply, Inc.), where the
debtor had paid the creditor in full pursuant to a chapter 11 plan
(thus “curing” the default), the Ninth Circuit held that an
oversecured creditor is not entitled to default interest. The
Future Media decision, by drawing a distinction between asset sales
conducted while a plan is pending and those conducted after a plan
has been confirmed, is likely to bring even more confusion to an
already perplexing area of the law.
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Caitlin Cline, J.D. Candidate 2010
No. 6, Vol. 1 (2009)