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payments must equal the total of the debt, not just the value of the collateral.
One simple method to determine how to satisfy both requirements is to determine the payment stream necessary to satisfy the present value requirement, and then see if the total of those payments equals or exceeds the total claim; if not, the difference could be added as a balloon at the end. Where the payment stream necessary to satisfy the present value test also satisfied the principal amount requirement, the undersecured creditor would not receive any greater payment on its secured claim over the life of the plan by making the election than if it did not make the election. In that case the only real benefit to making the election is to retain a larger lien and receive a greater payment if the debtor sells the property early during the term of the plan or if the debtor defaults on the plan and the value of the property has appreciated since confirmation.
a. Length of Deferral.
The Code sets no limit on the length of time over which payments may be deferred in Chapter 11. The only limits are the principles of adequate protection of the secured creditor's interest and feasibility of the plan.
If the collateral is depreciable, the deferral should not exceed "the remaining useful life of the collateral." It may be possible to exceed this limitation by provisions for replacement liens, but demonstrating that future replacement liens would provide adequate protection for the claim may impose "a difficult if not impossible burden of proof for the debtor in a payout extended beyond the life of the collateral." If the collateral is not expected to depreciate, such as real estate, then the only limit may be the difficulty of proving feasibility to satisfy § 1129(a)(11), and some courts have approved payment terms as long as 15, 20 or even 40 years. For single asset cases, a twenty five year amortization with a seven or ten year balloon is becoming fairly common.
As noted above, in addition to requiring payments equal to the amount of the debt, § 1129(b)(2)(A)(i)(II) also requires that the secured creditor receive deferred payments "of a
