Client Alert: Payment of Default Interest on Lender’s Cure Claim Under Chapter 11 Plan

In In re New Investments, Inc., a panel of the United States Court of Appeals for the Ninth Circuit overruled a 28-year-old precedent of the court and held that any cure claim under a plan of reorganization that seeks to reinstate the maturity of a loan must include the payment of default interest to the lender for the pre-cure period. The case arose under § 1123 of the Bankruptcy Code, which provides a debtor with the opportunity to reinstate the maturity of a defaulted loan pursuant to a plan of reorganization.