Another Bankruptcy Court Rules the "Solvent Debtor Exception" Survived Enactment of the Bankruptcy Code

Whether the pre-Bankruptcy Code "solvent debtor exception" requiring the payment of postpetition interest to dissenting unsecured creditors under a chapter 11 plan survived the enactment of the Bankruptcy Code in 1978 has been the subject of a handful of recent court rulings. This is, perhaps, most notably true of the chapter 11 case of Ultra Petroleum Corp. in connection with a protracted battle over the debtor's obligation to pay make-whole premiums to unsecured noteholders.

The U.S. Bankruptcy Court for the District of Massachusetts weighed in on this issue in In re Mullins, 2021 WL 2948685 (Bankr. D. Mass. July 13, 2021). After delivering a treatise on the history and application of the exception, the court held that certain provisions of the Bankruptcy Code—namely, the "absolute priority rule" and the "best interests test"—"incorporate and implement the 'solvent debtor exception' established over the course of hundreds of years of insolvency jurisprudence." The court also held that the appropriate rate of postpetition "pendency" interest is the federal judgment rate.

Impairment Under a Chapter 11 Plan

Classes of claims or interests may be either "impaired" or "unimpaired" by a chapter 11 plan. The distinction is important because only impaired classes have the ability to vote to accept or reject a plan. Under section 1126(f) of the Bankruptcy Code, unimpaired classes of creditors and shareholders are conclusively presumed to have accepted a plan.

Section 1124 provides that a class of creditors is "impaired" under a plan unless, among other things, the plan: (i) "leaves unaltered the legal, equitable, and contractual rights" to which each creditor in the class is entitled; or (ii) cures any defaults (with limited exceptions), reinstates the maturity and other terms of the obligation, and compensates each creditor in the class for resulting losses.

Section 1124 originally included a third option, then section 1124(3), for rendering a claim unimpaired—by providing the claimant with cash equal to the allowed amount of its claim. In In re New Valley Corp., 168 B.R. 73 (Bankr. D.N.J. 1994), the court ruled that, in light of this third option, a solvent debtor's chapter 11 plan that paid unsecured claims in full in cash, without postpetition interest, did not impair the claims.

Because of the perceived unfairness of New Valley, Congress removed this option from section 1124 of the Bankruptcy Code in 1994. Since then, most courts considering the issue have held that, if an unsecured claim is paid in full in cash with postpetition interest at an appropriate rate, the claim is unimpaired under section 1124. See, e.g., In re PPI Enterprises (U.S.), Inc., 324 F.3d 197, 205–07 (3d Cir. 2003).

The Bankruptcy Code's Priority Scheme

The Bankruptcy Code sets forth certain priority rules governing distributions to creditors in both chapter 7 and chapter 11 cases. Secured claims enjoy the highest priority under the Bankruptcy Code. See generally 11 U.S.C. § 506. The Bankruptcy Code then recognizes certain priority unsecured claims, including claims for administrative expenses, wages, and certain taxes. See id. § 507(a). General unsecured claims come next in the priority scheme, followed by any subordinated claims and the interests of equity holders.

In a chapter 7 case, the order of priority for the distribution of unencumbered assets is determined by section 726 of the Bankruptcy Code. The order of distribution ranges from payments on claims in the order of priority specified in section 507(a), which have the highest priority, to payment of any residual assets after satisfaction of all claims to the debtor, which has the lowest priority. Distributions are to be made pro rata to parties of equal priority within each of the six categories specified in section 726. If claimants in a higher category of distribution do not receive full payment of their claims, no distributions can be made to parties in lower categories.

In a chapter 11 case, the chapter 11 plan determines the treatment of secured and unsecured claims (as well as equity interests), subject to the requirements of the Bankruptcy Code. If a creditor does not agree to impairment of its claim under the plan—such as by agreeing to receive less than payment in full—and votes to reject the plan, the plan can be confirmed only under certain specified conditions. Among these conditions are the following: (i) the creditor must receive at least as much under the plan as it would receive in a chapter 7 liquidation (11 U.S.C. § 1129(a)(7)) (commonly referred to as the "best interests" test); and (ii) the plan must be "fair and equitable" (Id. § 1129(b)(1)).

Section 1129(b)(2)(B) of the Bankruptcy Code provides that a plan is "fair and equitable" with respect to a dissenting impaired class of unsecured claims if the creditors in the class receive or retain property of a value equal to the allowed amount of their claims or, failing that, if no creditor or equity holder of lesser priority receives any distribution under the plan. This is known as the "absolute priority rule."

Disallowance of Claims for Unmatured Interest and the Solvent Debtor Exception

Section 502(b)(2) of the Bankruptcy Code provides that a claim for interest that is "unmatured" as of the petition date shall be disallowed. See generally Collier on Bankruptcy ¶ 502.03 (16th ed. 2021) ("fixing the cutoff point for the accrual of interest as of the date of the filing of the petition is a rule of convenience providing for equity in distribution"). Charges that have been deemed to fall into this category include not only ordinary interest on a debt but also items that have been deemed the equivalent of interest, such as original issue discount and make-whole premiums (although the latter is the subject of vigorous dispute). Id. This means that, unless there is an exception stated elsewhere in the Bankruptcy Code (see below), any claim for postpetition interest will be disallowed.

The bar on recovery by creditors of interest accruing after a bankruptcy filing predates the enactment of the Bankruptcy Code and is derived from English law. Nicholas v. U.S., 384 U.S. 678, 682 (1966) (explaining that "[i]t is a well-settled principle of American bankruptcy law that in cases of ordinary bankruptcy, the accumulation of interest on claims against a bankruptcy estate is suspended as of the date the petition in bankruptcy is filed [which rule is] grounded in historical considerations of equity and administrative convenience"); Sexton v. Dreyfus, 219 U.S. 339, 344 (1911) (recognizing the rule that interest ceases to accrue on unsecured debt upon commencement of bankruptcy proceedings is a fundamental principle of English bankruptcy law, which is the basis of the U.S. system). Section 63 of the Bankruptcy Act of 1898, as amended by the Chandler Act of 1938, expressly disallowed unmatured interest as part of a claim. Bankruptcy Act of 1938, ch. 575, § 63, 52 Stat. 840 (repealed 1978).

English law contained notable exceptions to the rule. These exceptions included the "solvent debtor" exception, which provided that interest would continue to accrue on a debt after a bankruptcy filing if the creditor's contract expressly provided for it, and would be payable if the bankruptcy estate contained sufficient assets to do so after satisfying other debts. See In re Ultra Petroleum Corp., 913 F.3d 533, 543-44 (5th Cir.) (citing treatises and cases), opinion withdrawn and superseded on reh'g, 943 F.3d 758 (5th Cir. 2019). In such cases, the post-bankruptcy interest was part of the underlying debt obligation, as distinguished from interest "on" a creditor's claim. Id.

The fundamental principle barring creditors from recovering postpetition interest on their claims was incorporated into U.S. bankruptcy law—as were the exceptions, but only in part.

In pre-Bankruptcy Code cases where the debtor possessed adequate assets to pay all claims in full with interest—meaning that the payment of interest to one creditor did not impact the recovery of other creditors—principles of equity dictated that creditors be paid interest to which they were otherwise entitled, most commonly at the rate determined by their contracts with the debtor. See Am. Iron & Steel Mfg. Co. v. Seaboard Air Line Ry., 233 U.S. 261, 266–67 (1914) (concluding "in the rare instances where the assets ultimately proved sufficient for the purpose, that creditors were entitled to interest accruing after adjudication"); Debentureholders Protective Comm. of Cont'l Inv. Corp. v. Cont'l Inv. Corp., 679 F.2d 264, 269 (1st Cir. 1982) (in refusing to confirm a plan under chapter X of the Bankruptcy Act because it did not pay postpetition interest on unsecured claims, noting that "[w]here the debtor is solvent, the bankruptcy rule is that where there is a contractual provision, valid under state law, providing for interest on unpaid [installments] of interest, the bankruptcy court will enforce the contractual provision with respect to both [installments] due before and [installments] due after the petition was filed"); Ruskin v. Griffiths, 269 F.2d 827, 832 (2d Cir. 1959) ("[W]here there is no showing that the creditor entitled to the increased interest caused any unjust delay in the proceedings, it seems to us the opposite of equity to allow the debtor to escape the expressly bargained-for" contractual interest provision); Sword Line, Inc. v. Indus. Comm'r of N.Y., 212 F.2d 865, 870 (2d Cir. 1954) (explaining that "interest ceases upon bankruptcy in the general and usual instances noted … unless the bankruptcy bar proves eventually nonexistent by reason of the actual solvency of the debtor"); Johnson v. Norris, 190 F. 459, 466 (5th Cir. 1911) (determining that debtors "should pay their debts in full, principal and interest to the time of payment whenever the assets of their estates are sufficient").

Even though section 502(b)(2) of the Bankruptcy Code provides that a claim for unmatured interest shall be disallowed, there are specific exceptions to the rule included elsewhere in the Bankruptcy Code. For example, section 506(b) of the Bankruptcy Code provides that an oversecured creditor is entitled to interest as part of its allowed secured claim.

In addition, in a chapter 7 case, the distribution scheme set forth in section 726 of the Bankruptcy Code designates as fifth in priority of payment "interest [on an unsecured claim] at the legal rate from the date of the filing of the petition." Thus, if the bankruptcy estate in chapter 7 case is sufficient to pay claims of higher priority, creditors are entitled to postpetition interest before the debtor can recover any surplus.

In a chapter 11 case, the chapter 7 priority scheme governs whether section 1129(a)(7) of the Bankruptcy Code is satisfied. Referred to as the "best interests" test, section 1129(a)(7) mandates that, unless each creditor in an impaired class accepts a chapter 11 plan, the creditor must receive at least as much under the plan as it would receive in a chapter 7 liquidation of the debtor. However, section 1129(a)(7)—and, by extension, section 726—apply only if a class of claims is impaired by a chapter 11 plan.

In cases where interest on a claim is permitted, the rate of interest payable is unclear. Section 726(a)(5) refers to interest at "the legal rate," which could mean the contract rate, the post-judgment rate, the federal statutory rate specified in 28 U.S.C. § 1961, or some other rate.

Whether the solvent debtor exception survived enactment of the Bankruptcy Code in 1978 is a matter of dispute. A handful of rulings from the federal circuit courts have suggested that the exception survived. See, e.g., In re Ultra Petroleum Corp., 943 F.3d 758, 765–66 (5th Cir. 2019) ("Our review of the record reveals no reason why the solvent debtor exception could not apply. As other circuits have recognized, 'absent compelling equitable considerations, when a debtor is solvent, it is the role of the bankruptcy court to enforce the creditors' contractual rights.' … That might be the case here. … But 'mindful that we are a court of review, not of first view,' we will not make the choice ourselves or weigh the equities on our own.") (citations omitted); Gencarelli v. UPS Capital Bus. Credit, 501 F.3d 1, 7 (1st Cir. 2007) (holding that a prepayment penalty in a solvent debtor chapter 11 case should not be disallowed under section 502(b) as unreasonable, and noting that "[t]his is a solvent debtor case and, as such, the equities strongly favor holding the debtor to his contractual obligations as long as those obligations are legally enforceable under applicable non-bankruptcy law"); Official Comm. of Unsecured Creditors v. Dow Corning Corp. (In re Dow Corning Corp.), 456 F.3d 668, 678 (6th Cir. 2006) (noting that "[t]he legislative history of the Bankruptcy Code makes clear that equitable considerations operate differently when the debtor is solvent: '[C]ourts have held that where an estate is solvent, in order for a plan to be fair and equitable, unsecured and undersecured creditors' claims must be paid in full, including postpetition interest, before equity holders may participate in any recovery'" (quoting 140 Cong. Rec. H10,752–01, H10,768 (1994) (statement of Rep. Brooks, Chairman of the House Committee on the Judiciary and coauthor of the Bankruptcy Reform Act of 1994)).

Recent Court Rulings

In In re Ultra Petroleum Corp., 624 B.R. 178 (Bankr. S.D. Tex. 2020) ("UPC"), leave to appeal granted, No. 21-20008 (5th Cir. Jan. 5, 2020), the bankruptcy court, on remand from the Fifth Circuit, considered whether a solvent debtor was obligated to pay a make-whole premium to unsecured noteholders under its confirmed chapter 11 plan and whether the noteholders were entitled to postpetition interest on their claims pursuant to the solvent debtor exception. Among other things, the court ruled that the solvent debtor exception survived the enactment of the Bankruptcy Code. Based on the legislative history, the court wrote, "Congress gave no indication that it intended to erode the solvent debtor exception" when it enacted the Bankruptcy Code. Id. at 198. Moreover, it noted, "[e]quitable considerations" continue to support it, including the policy against allowing a windfall at the expense of creditors to any debtor that can afford to pay all of its debts. Id.

According to the court, this conclusion is also supported by post-Bankruptcy Code court rulings involving solvent debtors as well as the removal from the Bankruptcy Code in 1994 of section 1124(3). In short, the court wrote, there is a "monolithic mountain of authority, developed over nearly three hundred years in both English and American courts, holding that a solvent debtor must make its creditors whole." Id. at 200 (citations omitted).

The court explained that, standing alone, neither section 105(a) of the Bankruptcy Code (giving the bankruptcy court broad equitable power), section 1129(a)(7) (the best interests test), nor section 1129(b)(1) (requiring a cram-down chapter 11 plan to be fair and equitable with respect to dissenting impaired classes of creditors) is a statutory source for the solvent debtor exception. Instead, the court wrote, "piecing these Bankruptcy Code provisions together," the solvent debtor exception flows through section 1124(1), which provides that, to render a class of claims unimpaired, a plan must leave unaltered the claimants' "legal, equitable, and contractual rights." Id. at 202. According to the court, "[b]ecause an unimpaired creditor has equitable rights to be treated no less favorably than an impaired creditor and to be paid in full before the debtor realizes a recovery, a plan denying post-petition interest in a solvent debtor case alters the equitable rights of an unimpaired creditor under § 1124(1)." Id. at 203.

Finally, the bankruptcy court held that the default contract rate is the appropriate rate of interest rather than the federal judgment rate. The court explained that the noteholders' right to postpetition interest was based on "two key equitable rights"—the right to receive no less favorable treatment than impaired creditors and the right to have their contractual rights fully enforced. Id. at 204. According to the court, if the noteholder class were paid interest at the federal judgment rate, it would be worse off than if it were impaired under UPC's plan because "even though the [noteholders] would receive identical interest as a hypothetical impaired class, as an unimpaired class the Claimants were deprived of the right to vote for or against the plan." Id. In addition, the court noted, limiting the noteholder class to interest at the federal judgment rate would contravene the purpose of the solvent debtor exception, which dictates that when a debtor is solvent, "a bankruptcy court's role is merely to enforce the contractual rights of the parties." Id.

In In re Cuker Interactive, LLC, 622 B.R. 67 (Bankr. S.D. Cal. 2020), a class of unsecured creditors consisting of two law firms opposed confirmation of a chapter 11 plan for a solvent debtor under which they were to be paid in full with interest, arguing that their claims were impaired because the plan proposed to pay interest at the federal judgment rate rather than the contract rate. Initially, the court noted that, in accordance with Ninth Circuit precedent, a solvent debtor must pay postpetition interest to general unsecured creditors "at the legal rate." Id. at 69 (citing In re Cardelucci, 285 F.3d 1231 (9th Cir. 2002) (applying the federal judgment rate in cases where creditors were impaired); In re PG&E, Corp., 610 B.R. 308 (Bankr. N.D. Cal. 2019) (postpetition interest must be paid at the federal judgment rate to render unsecured claims unimpaired), aff'd sub nom. Official Committee of Unsecured Creditors v. PG&E Corp., No. 20-cv-04570-HSG (N.D. Cal. May 21, 2021), appeal filed, No. 21-16043 (9th Cir. June 17, 2021); In re Beguelin, 220 B.R. 94 (B.A.P. 9th Cir. 1998) (same)).

On the basis of that precedent, the court ruled that, in accordance with the solvent debtor exception, the bankruptcy court's role in a case involving a solvent debtor was "'merely to enforce the contractual rights of the parties.'" Cuker, 622 B.R. at 71 (quoting UPC, 624 B.R. at 195). Moreover, the Cuker court explained, construing the solvent debtor exception to require the payment of contract-rate interest might be problematic in some cases:

While the "solvent-debtor exception" would work in cases with only a few creditors, the Court agrees that application of this exception poses a significant threat to the bankruptcy court's administrative efficiency in larger cases. See In re Cardelucci, 285 F.3d at 1236 (recognizing that even on occasions when a debtor may receive a windfall, the uniform approach of applying the Federal Judgment Rate to calculate postpetition interest to unsecured creditors is a more efficient and fair and equitable outcome than applying each creditors' contractual rate or the applicable state law judgment rate, which varies state-by-state). If the "solvent-debtor exception" were applied to a debtor with hundreds or thousands of creditors, the estate might be compelled to carry on indefinitely, at a huge administrative expense, determining the individual contractual rights of each individual unsecured creditor; and perhaps, resulting in different treatment to creditors of the same class. The Court agrees with the Ninth Circuit in Cardelucci that there is no reason Congress would have intended to create such a costly administrative inefficiency in the bankruptcy courts.

Id. The court accordingly held that interest must be paid at the federal judgment rate.

Mullins

Joseph R. Mullins ("debtor") filed for chapter 11 protection on May 8, 2019, in the District of Massachusetts. He proposed a chapter 11 plan that would pay general unsecured claims in full with prepetition and post-effective date interest, but would not pay unsecured creditors interest that accrued between the petition date and the effective date ("pendency interest"). As of the date of the plan confirmation hearing, the debtor was solvent to the tune of approximately $50 million.

The unsecured creditor class objected to confirmation, arguing that the proposed plan impaired their claims and that it violated the best interests test (section 1129(a)(7)) and the absolute priority rule (section 1129(b)(2)(B)) by not granting creditors pendency interest at the rate prescribed by state law. According to them, section 1129(b)(2)(B) is ambiguous and uses broad language that must be interpreted through the lens of the solvent debtor exception.

The debtor countered that section 1129(b)(2)(B) is clear and requires merely that interest be paid from the plan effective date to ensure that general unsecured creditors receive payments having a present value equal to their allowed claims. According to the debtor, because the provision refers to "the allowed amount of such claim," the court need only look to section 502(b)(2), which provides that an allowed claim excludes unmatured interest as of the petition date. Therefore, the debtor argued, section 502(b)(2) established that the "allowed" amount of each general unsecured claim did not include pendency interest, and the absolute priority rule and the fair and equitable standard were satisfied because the plan proposed to pay the unsecured claims in full with post-effective date interest at 3.25%—an adjusted market rate equaling or exceeding the requirements of the absolute priority rule.

The debtor also argued that pendency interest should be paid only if required to satisfy the best interests test of section 1129(a)(7) and, if so required, at the federal judgment rate. The debtor urged the court not to adopt a "free-floating solvent debtor exception and a balancing of the equities test." Mullins, 202WL 2948685, at *8.

The Bankruptcy Court's Ruling

U.S. Bankruptcy Judge Christopher J. Panos concluded that the solvent debtor exception survived enactment of the Bankruptcy Code by means of the absolute priority rule and the best interests test.

He reasoned that the lawmakers' use of the phrase "fair and equitable" in sections 1129(b)(1) and 1129(b)(2) "was intended to codify at least a century of bankruptcy jurisprudence … and grounded the solvent debtor exception as it related to impaired creditors in that provision." Id. Judge Panos also noted that, by using the term "includes" in the opening clause of section 1129(b)(2), Congress did not intend the minimum requirements expressly set forth regarding secured claims, unsecured claims, and interests to limit the meaning of "fair and equitable." Moreover, he explained, the legislative history of the provision does not suggest that "Congress intended to abrogate the solvent debtor exception." Id. at *9.

According to Judge Panos, this conclusion is bolstered by the legislative history of the 1994 amendments to the Bankruptcy Code, when Congress repealed section 1124(3) in response to the New Valley decision:

The words "fair and equitable" are terms of art that have a well-established meaning under the case law of the Bankruptcy Act as well as under the Bankruptcy Code. Specifically, courts have held that where an estate is solvent, in order for a plan to be fair and equitable, unsecured and undersecured creditors' claims must be paid in full, including postpetition interest, before equity holders may participate in any recovery.

Id. at *10 (quoting H.R. Rep. No. 103–835 at 47–48 (1994)). Judge Panos acknowledged that divining lawmakers' intent regarding a specific provision of a statute is "an imprecise and unsatisfying exercise." However, on the basis of this legislative history and relevant court rulings, he was "persuaded that Congress must have been cognizant of the long-established solvent debtor exception and there is no evidence of any intent to abrogate centuries of law that had developed by enacting the Bankruptcy Code." Id. at *11.

Construing section 1129(b) as not abrogating the solvent debtor exception, Judge Panos noted, does not conflict with section 502(b)(2). He explained that, although section 502(b)(2) unambiguously provides that postpetition interest cannot be included as part of an allowed claim, "there is a significant distinction between whether postpetition interest can be part of an allowed claim and whether there are circumstances under which the debtor may be required to pay postpetition interest on an allowed claim." Id. at *12.

Judge Panos emphasized that he was not adopting a "free-floating solvent debtor exception and a balancing of the equities test." Id. at *8 n.8. Rather, he wrote, "well-developed jurisprudence and the evidentiary record in this and in future cases will dictate the course of the 'solvent debtor exception' in these rare cases—unless a future statutory amendment or other controlling appellate authority mandates a different approach." Id. Moreover, because he concluded that the statutory provisions codifying the absolute priority rule and the best interests test required the payment of pendency interest in this case, Judge Panos also declined to decide "whether the solvent debtor exception is founded more generally in an 'equitable right' inherent in insolvency proceedings under the Code rather than in § 1129(b) or any other specific provisions of the Code." Id. at *13 n.12.

Judge Panos concluded that the payment of pendency interest to unsecured creditors was warranted in the case before him. Among other things, Judge Panos emphasized that the debtor unquestionably had more than enough cash to fund distributions under his chapter 11 plan, including the payment of pendency interest to the unsecured creditors class.

Judge Panos then addressed the appropriate rate of pendency interest. He noted that setting the rate was within his discretion, but acknowledged that the weight of authority, "absent strong equitable considerations," supported a finding that pendency interest at the state law contract rate should be paid by a solvent debtor to a dissenting class of unsecured creditors for a chapter 11 plan to be fair and equitable. Id. at *15. Even so, Judge Panos explained, the claims of unsecured creditors in this case were based on a state court judgment rather than a contract. He therefore concluded that, to satisfy the "fair and equitable standard," the debtor had to propose an amended plan that paid pendency interest to unsecured creditors at the state judgment rate (here, 12% per annum), which significantly exceeded any risk-based market rate.

However, Judge Panos agreed with the majority of other courts, finding that, to satisfy the "best interests" test, which incorporates section 726(a)(5)'s dictate that interest be paid at "the legal rate" in a case involving sufficient assets, pendency interest must be paid at the federal judgment rate (approximately 0.74% per annum).

The unsecured creditors argued that, in a solvent debtor case, the court had the discretion to interpret "the legal rate" as the state judgment rate applicable to their claims as an extension of the solvent debtor exception. However, based on his holdings regarding the fair and equitable standard requirements and the relationship of those requirements to the best interests test, Judge Panos declined "to explicitly decide in this case whether, when a debtor is liquidation solvent, a rate of interest higher than the federal judgment rate might constitute 'the legal rate' for purposes of § 726(a)(5) as applied by § 1129(a)(7)(A)(ii) or whether a more general 'solvent debtor exception' might dictate that result." Id. at *19 (footnote omitted).

He accordingly denied confirmation of the debtor's chapter 11 plan without prejudice to the debtor's right to propose an amended plan.

Outlook

The dispute regarding the continued vitality of the solvent debtor exception has been examined in several recent court rulings. The significance of these decisions, however, is limited because solvent debtor chapter 11 cases are rare. Even so, they reinforce the well-established statutory and equitable principle that debtors with the means to pay all of their creditors in full should be obligated to do so.

Although the courts in Mullins and UPC agreed that the solvent debtor exception survived the enactment of the Bankruptcy Code, they notably disagreed over the statutory basis for its continued application. In Mullins, the court concluded that sections 1129(a)(7) and 1129(b)(2) provide the necessary authority, whereas the UPC court specifically rejected reliance on these sections (as well as the court's broad equitable authority under section 105(a)) as a basis for applying the exception. Instead, the court in UPC determined that the solvent debtor exception flows through section 1124(1), which conditions nonimpairment of a class of claims on leaving unaltered the claimants' "legal, equitable, and contractual rights."

Court rulings regarding the rate of interest—whether the federal judgment rate, a state judgment rate or the contractual default rate—that must be paid to unsecured creditors in a solvent debtor case have been a mixed bag, with a possible circuit split in the offing due to pending circuit court appeals in the UPC and PG&E cases. The issue has also arisen in the chapter 11 cases of The Hertz Corporation and its affiliates (collectively, "Hertz"). The U.S. Bankruptcy Court for the District of Delaware confirmed a chapter 11 plan for Hertz on June 10, 2021. The plan provided for the payment of postpetition interest to unsecured creditors at the federal judgment rate, but preserved for future litigation the dispute over both the requirement to pay postpetition interest to render the claims unimpaired and the appropriate rate of interest.