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)