Creditors Can Recover Post-Petition Interest by Incorporating Original Agreement into the Plan of Reorganization by Referencing a Specific Clause in the Original Agreement
Courts will generally interpret a contract according to its plain language, and any intent to incorporate a separate document must be clearly manifested with sufficient specificity. The parties’ intent will be inferred from the express language of the contract. Under section 506(b) of title 11 of the United States Code (the “Bankruptcy Code”), an oversecured creditor is entitled to post-petition interest on its secured claim up to the value of the collateral securing its claim. Additionally, most courts have ruled that a secured creditor is entitled to post-petition interest according to the rate specified in the contract or a rate established by applicable non-bankruptcy law. However, creditors may reserve the right to recover post-petition interest at the contractual rate so long as (1) they expressly manifest their intent to do so in the plan of reorganization, and (2) the interest serves no purpose that violates equitable considerations.