Aug
30
2007
UPS Cap. Bus. Credit v. Gencarelli (In re Gencarelli)
At issue was a commercial lender's right to receive a bargained-for prepayment penalty from a solvent debtor. Defendant creditor sought review of a decision of the District Court for the District of Rhode Island, which held that 11 U.S.C. § 506(b) governed and that it could recover prepayment penalties only if they were reasonable; it further affirmed a bankruptcy court's determination that they were not.
Ruling:
Bankruptcy court erred in disallowing claim for prepayment penalties based on standards for priority rather than allowability.
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