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subsequent Chapter 13 case, the Fifth Circuit held the valuation had to be as of the petition date, without acknowledging the conflict with its earlier holding.271
Yet a third approach is to hold that the amount of the debt deemed "legally secured" in the case must be determined as of the petition date and remain static notwithstanding any postpetition payments, even though such payments alter the amount that is "factually" secured.272 This is in reality an adoption of the "subtraction" approach in that the amount of the secured debt that must be serviced under a plan is determined by deducting postpetition payments from the secured debt based on the value of the property as of the petition date, but avoids the conclusion that such a creditor can therefore become oversecured and entitled to postpetition interest. One advantage to this approach is that it avoids the circularity that can result if an undersecured creditor is deemed to become "legally" oversecured because the secured portion of the debt is reduced by payments during the case, which then entitles the creditor to interest on that portion of its debt, causing the accounting for payments to flip-flop between principal and interest.
These lines of authority address only the issue of the amount of the secured claim. Regardless of which method is chosen, these cases do not address the distinct question of whether any monies collected from rents that the debtor still has on hand as of confirmation can be used to make postconfirmation debt service payments.273 No reported case has yet carefully analyzed that issue, which should be analyzed in terms of present value and adequate protection of the secured claim.274
Because of the possibility of a § 1111(b) election, § 1129(b)(2)(A)(i)(II) has two requirements specifying the amount that must be paid. First, the deferred cash payments must total the allowed amount of the claim, Klee's "principal amount test."275 Second, the
271 In re Stembridge, 394 F.3d 383 (5th Cir. 2004).
272
In re T-H New Orleans Limited Partnership, 1995 WL 649945 (E.D. La. 1995).
273
The same issue can arise as an accounting issue if rents have been paid during the pendency of the case, but it is easier to understand when the cash remains in the debtor's account as of confirmation. This may be one reason that debtors object to making postpetition payments of net operating income to secured creditors even though the rents must be sequestered and the debtor cannot use them for any other purpose. It also may allow the debtor to benefit from the time value of that money, if interest earned during the pendency of the case is ultimately applied to the postconfirmation debt service.
274
See In re Ridgewood Apartments of DeKalb County, Ltd., 183 B.R. 784 (Bankr. S.D. Ohio 1995).
275
K. Klee, "All You Ever Wanted to Know About Cram Down Under the New Bankruptcy Code,"
58
