How are unsecured creditor's paid interest in a solvent debtors Chapter 7?

[womanonfire]

Is it the case that every time a debtor is solvent and able to pay 100% of her creditors in chapter 7 that interest is added to those debts?

[justbroke]

Why would a solvent debtor file a Chapter 7? I guess this is where it is strategic, such as owning an unencumbered $8,000,000 property in Florida, yet having $1,000,000 in debt.

In my $8,000,000 property hypothetical, the debtor would not need liquidate the home. They would just discharge the entire $1,000,000 assuming they have no other "non-exempt" property to fund the liquidation.

In that case, what do you mean by interest? In a Chapter 7, the liquidation is typically done by the Trustee and the payments made in a lump sum. The creditors file a claim and can claim all amounts contractually due up to the date of filing (principal, interest, penalties, and/or legal fees based on the contract).

[womanonfire]

Why would a solvent debtor file a Chapter 7?

I don't know, I'm trying to come up with an amount that I would pay in a hypothetical chapter 7 in case the Trustee comes back and says my modified plan doesn't propose to pay interest to unsecured creditors and thus, is in bad faith because of the best interest of the creditor's test.

I feel I'm like Marty in Ozark, always trying to get in front of a situation lol.

[justbroke]

I'm not saying that a solvent debtor can't file a Chapter 7. It's just that the Chapter 7 liquidation test is easy to perform and calculate how much would need to be paid by the debtor.

In the Chapter 13 context, perhaps you were not solvent when you filed. Even if you are now solvent, remember that the test is based on the date that you filed. If you were insolvent at that time, but now you are solvent, I don't believe that changes the fact that you were insolvent at the time of filing.

Of course, these are just my thoughts. I never ran into this issue of interest in my Chapter 13.

[womanonfire]

I did find one case regarding interest in chapter 7 and it is my judge's opinion. It's very unusual but my judge decided that the rate of interest, in that case, would be the federal rate. I think that would be the rate I would pay if he agreed that I pay interest during the course of chapter 13.

https://www.georgiabankruptcyblog.co...bk-51556-0.pdf

So in a hypothetical chapter 7, for me, I had enough home equity even after all my exemptions to pay creditors in full. This is why I am in a 100% plan now. So let's say that the estate was liquidated and unsecured creditors can also get interest. Would it be a flat rate of interest based on the approved claim amount? Or would the interest owed keep accumulating daily or monthly until the claim is paid?

[justbroke]

Yes, but the federal rate was typically low for a Chapter 7 as it's based on the post-judgment interest rate for federal judgments. Because the Fed has been go crazy, it's no longer the typical 1%. It is now closer to 5%.

I think you're right that the Chapter 13 "best interests of creditors test" (a/k/a the Chapter 7 liquidation test) includes what you'd pay in a Chapter 7 liquidation. I also think you are right that it would be based on the claim amount (since a claim can't include unearned/unmatured interest).

*** The post-judgment interest rate for judgments entered from October 24through October 30, 2022 is: 4.57%. (Source: US District Court)