Determining the Limits of Postpetition Interest Under Section 506(b) of the Bankruptcy Code: In Re Ron Pair Enterprises

This article will consider the merits of both sides of the debate that now engulfs Section 506(b), as presented primarily by the Sixth and Fourth Circuit Courts in Ron Pair Enterprises and Best Repair, respectively. After summarizing the arguments presented and the decision of the court in Ron Pair Enterprises, the article will present an analysis of the majority and minority views on the language of Section 506(b) and offer a critical assessment of the pre-Code law on the allowance of postpetition interest on over-secured claims. From this assessment, this article will conclude that Section 506(b) should be interpreted in accordance with the majority view of permitting postpetition interest on all over-secured claims, regardless of the consensual or nonconsensual nature of the lien. In support of this conclusion, the article will show that the language of Section 506(b) is not so ambiguous as to permit a contrary reading, and that to conclude otherwise, as the minority would urge, would serve to continue a strained and artificial reading of the provision. This conclusion will also be based on an analysis and assessment of the judicial evolution and logic put forth in support of the pre-Code law of limiting postpetition interest to consensual liens. This support of pre-Code law is found to be flawed and questionable as a well established rule of bankruptcy law