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RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 16b0002p.06

BANKRUPTCY APPELLATE PANEL

OF THE SIXTH CIRCUIT

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In re: MILDRED JOSEPHINE BRATT,

Debtor.

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Nos. 15-8009/8010

Appeal from the United States Bankruptcy Court 

for the Middle District of Tennessee at Nashville.

No. 14-05344—Randal S. Mashburn, Bankruptcy Judge.

Argued: March 1, 2016

Decided and Filed: April 26, 2016

Before: DELK, OPPERMAN and WISE, Bankruptcy Appellate Judges.

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COUNSEL

ARGUED: R. Alex Dickerson, DEPARTMENT OF LAW OF THE METROPOLITAN 

GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, Nashville, Tennessee, for 

Appellant in 15-8009. Gill R. Geldreich, OFFICE OF THE TENNESSEE ATTORNEY 

GENERAL, Nashville, Tennessee, for Appellant in 15-8010. Henry E. Hildebrand, III, OFFICE 

OF THE CHAPTER 13 TRUSTEE, Nashville, Tennessee, for Appellee Trustee. Alexander S. 

Koval, ROTHSCHILD & AUSBROOKS, PLLC, Nashville, Tennessee, for Appellee Bratt. 

ON BRIEF: R. Alex Dickerson, DEPARTMENT OF LAW OF THE METROPOLITAN 

GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, Nashville, Tennessee, for 

Appellant in 15-8009. Gill R. Geldreich, OFFICE OF THE TENNESSEE ATTORNEY 

GENERAL, Nashville, Tennessee, for Appellant in 15-8010. Henry E. Hildebrand, III, OFFICE 

OF THE CHAPTER 13 TRUSTEE, Nashville, Tennessee, for Appellee Trustee. Mary Beth 

Ausbrooks, ROTHSCHILD & AUSBROOKS, PLLC, Nashville, Tennessee, Thomas F. Bloom, 

Nashville, Tennessee, for Appellee Bratt.

>
Nos. 15-8009/8010 In re Bratt Page 2

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OPINION

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TRACEY N. WISE, Bankruptcy Appellate Panel Judge. Metropolitan Government of 

Nashville & Davidson County (“Metro”) objected to a chapter 13 plan which proposed to pay 

12% interest on a delinquent tax debt, asserting that, pursuant to newly amended Tennessee Code 

Annotated (“T.C.A.”) § 67-5-2010(d), the correct interest rate should be 18%. The bankruptcy 

court found that T.C.A. § 67-5-2010(d) violates the Supremacy Clause of the United States 

Constitution, determining that it imposes a penalty on bankruptcy debtors in violation of the 

mandates of the Bankruptcy Code. Metro and the State of Tennessee, as an intervenor, each 

timely filed an appeal. For the reasons stated below, the Panel finds that T.C.A. § 67-5-2010(d) 

is not applicable to determine the interest rate pursuant to 11 U.S.C. § 511. Thus, the Panel does 

not reach the question of whether T.C.A. § 67-5-2010(d) is constitutional. The bankruptcy 

court’s decision that the appropriate interest rate is 12% is AFFIRMED on other grounds.

I. ISSUE ON APPEAL

Appellants’ stated issue on appeal is whether the bankruptcy court erred in holding that 

T.C.A. § 67-5-2010(d) is invalid under the Supremacy Clause of the United States Constitution. 

For the reasons stated below, the Panel does not reach this issue. The sole determinative issue on 

appeal is whether, pursuant to 11 U.S.C. § 511, the interest rate applicable to Debtor’s delinquent 

tax debt is determined under T.C.A. § 67-5-2010(d). 

II. JURISDICTION AND STANDARD OF REVIEW

Under 28 U.S.C. § 158(a)(1), this Panel has jurisdiction to hear appeals “from final 

judgments, orders, and decrees” issued by the bankruptcy court. For purposes of appeal, an 

order is final if it “ends the litigation on the merits and leaves nothing for the court to do but 

execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S. Ct. 

1494, 1497 (1989) (quotation marks and citation omitted). 
Nos. 15-8009/8010 In re Bratt Page 3

None of the parties have challenged the Bankruptcy Appellate Panel’s jurisdiction to hear 

this appeal. However, the unusual posture of the appeal is worth noting. The parties appeal from 

an opinion entered on February 26, 2015 (the “Opinion”). There is no order associated directly 

with the Opinion, but it relates back to the Order Confirming Chapter 13 Plan. (“Confirmation 

Order,” Bankr. No. 14-5344, ECF No. 47.) An order confirming a chapter 13 plan is typically a 

final order for purposes of appeal. See United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 

260, 269, 130 S. Ct. 1367, 1376 (2010). The tax interest rate issue raised in this appeal was 

initially raised as an objection to confirmation of the chapter 13 plan. The parties, however, 

agreed to plan confirmation with the interest rate issue reserved pending further briefing and 

hearing. Following oral argument, the bankruptcy court issued the Opinion, which held T.C.A. 

§ 67-5-2010(d) unconstitutional as a violation of the Supremacy Clause. The Confirmation 

Order was not final until the interest rate issue was resolved by the Opinion. Therefore, the 

Opinion ended the litigation on the merits and left nothing for the court to do regarding plan 

confirmation. Accordingly, the Panel has jurisdiction to hear this appeal.

A bankruptcy court’s decision that relies on or interprets state law and the Bankruptcy 

Code is reviewed de novo.” Richardson v. Schafer (In re Schafer), 455 B.R. 590, 592 (B.A.P. 

6th Cir. 2011)(citing Menninger v. Schramm (In re Schramm), 431 B.R. 397, 399 (B.A.P. 6th 

Cir. 2010) (rev’d on other grounds)). See also Lebovitz v. Hagemeyer (In re Lebovitz), 360 B.R. 

612 (B.A.P. 6th Cir. 2007) (reviewing bankruptcy court’s interpretation of state’s exemption 

statute de novo because it involves a question of law). “De novo means that the appellate court 

determines the law independently of the trial court’s determination.” Treinish v. Norwest Bank 

Minn., N.A. (In re Periandri), 266 B.R. 651, 653 (B.A.P. 6th Cir. 2001) (citation omitted).

III. FACTS

Mildred Josephine Bratt (“Debtor”) filed a chapter 13 bankruptcy petition on July 3, 

2014. Debtor listed a debt owed to Metro for delinquent property taxes. The debt is secured by 

a lien. All parties agree that Metro’s claim is “oversecured.” Thus, 11 U.S.C. § 506(b), which 

authorizes interest to be paid on oversecured claims, is applicable to Metro’s claim.
Nos. 15-8009/8010 In re Bratt Page 4

Debtor’s chapter 13 plan proposed to pay 12% interest on the tax debt. Debtor asserted 

that the interest rate is determined by T.C.A. § 67-5-2010(a)(1) (“Subsection (a)(1)”) which 

provides:

(a)(1) To the amount of tax due and payable, a penalty of one-half of one 

percent (0.5%) and interest of one percent (1%) shall be added on March 1, 

following the tax due date and on the first day of each succeeding month, except 

as otherwise provided in regard to municipal taxes. . . .

Tenn. Code Ann. § 67-5-2010(a)(1). Metro objected to plan confirmation asserting that the 

proper interest rate under Tennessee law is 18%. Metro cited a newly revised subsection of 

Tennessee Code § 67-5-2010 which provides:

(d) For purposes of any claim in a bankruptcy proceeding pertaining to 

delinquent property taxes, the assessment of penalties determined pursuant to this 

section constitutes the assessment of interest.

Tenn. Code Ann. § 67-5-2010(d) (emphasis added) (effective July 1, 2014) (“Subsection (d)”). 

The Tennessee legislature adopted Subsection (d) in response to the bankruptcy court’s prior 

decision in In re Gift, 469 B.R. 800 (Bankr. M.D. Tenn. 2012). In Gift, the bankruptcy court 

held that the 6% annual penalty provided for by Subsection (a)(1) was not allowed under

11 U.S.C. § 506(b).

The bankruptcy court in the case at bar agreed with Debtor’s assertion that the annual 

interest rate should be 12%, holding that Subsection (d) directly conflicts with the

express language of these bankruptcy statutes and the clear intent reflected in the 

overall claims process [that] create a well-defined federal policy that post-petition 

penalties that might otherwise be owed to secured creditors are simply not paid in 

bankruptcy cases.

In re Bratt, 527 B.R. 303, 312 (Bankr. M.D. Tenn. 2015).

The Tennessee statute [Subsection (d)] impermissibly conflicts with longstanding federal bankruptcy policy against the collection of penalties by an 

oversecured claimholder in at least two ways: (1) the Tennessee statutory 

amendment does not set a “rate of interest” as allowed by § 511, but instead 

directs the bankruptcy court to treat the state’s penalty claim inconsistently with 

the Bankruptcy Code, and (2) the penalty, called interest by the statute, is clearly 

penal in nature.
Nos. 15-8009/8010 In re Bratt Page 5

Id. Thus, the bankruptcy court found Subsection (d) unconstitutional as a violation of the 

Supremacy Clause. Accordingly, the bankruptcy court held that the interest rate for the 

delinquent tax debt could not be determined from Subsection (d). Rather, the bankruptcy court 

found that the appropriate interest rate for the delinquent tax claim was 12% as provided for 

under Subsection (a)(1). Metro and the State of Tennessee, as intervenor, appealed. The Debtor, 

along with the Chapter 13 Trustee, Henry Hildebrand (“the Trustee”), filed briefs arguing that 

the correct interest rate should be 12%.

IV. DISCUSSION

In this appeal, the Bankruptcy Appellate Panel must determine whether the correct 

interest rate on the delinquent tax debt is 12% pursuant to Subsection (a)(1), as determined by 

the bankruptcy court, or 18% pursuant to Subsection (d) as argued by Metro and the State of 

Tennessee. The Panel agrees with the bankruptcy court’s result, but not its rationale.1 For the 

reasons stated herein, the Panel declines to reach the question of whether Subsection (d) is 

constitutional, instead holding that it is simply not applicable to the facts of this case under 

11 U.S.C. § 511’s plain meaning.

Section 511 explains how the interest rate for tax claims is determined under the 

Bankruptcy Code. It provides:

(a) If any provision of this title requires the payment of interest on a tax 

claim or on an administrative expense tax, or the payment of interest to enable a 

creditor to receive the present value of the allowed amount of a tax claim, the rate 

of interest shall be the rate determined under applicable nonbankruptcy law.

11 U.S.C. § 511 (emphasis added). This appeal turns on the meaning of the phrase “applicable 

nonbankruptcy law.”

 1

See Kraus Anderson Capital, Inc. v. Bradley (In re Bradley), 507 B.R. 192, 201 (B.A.P. 6th Cir.), appeal 

dismissed, 588 F. App’x 480 (6th Cir. 2014) (internal quotation marks and citations omitted) (“[T]he bankruptcy 

court’s decision ... may be affirmed on any grounds supported by the record.”); see also Buke, LLC v. Eastburg

(In re Eastburg), 447 B.R. 624, 632 (B.A.P. 10th Cir. 2011) (internal quotation marks and footnotes omitted) (“We 

are free to affirm ... on any grounds for which there is a record sufficient to permit conclusions of law, even grounds 

not relied upon by the trial court. Further, we may affirm even where the lower court reached its conclusions from a 

different or even erroneous course of reasoning.”)
Nos. 15-8009/8010 In re Bratt Page 6

The pivotal issue in this case is one of statutory construction. The language of the 

statute itself is the starting point in statutory interpretation. Unless they are 

otherwise defined, the words in a statute will be interpreted as taking their 

ordinary, contemporary, common meaning. When construing a federal statute, it 

is appropriate to assume that the ordinary meaning of the language that Congress 

employed accurately expresses its legislative purpose. If the statutory language is 

unambiguous, the judicial inquiry is at an end, and the plain meaning of the text 

must be enforced.

Deutsche Bank Nat’l Tr. Co. v. Tucker, 621 F.3d 460, 462-63 (6th Cir. 2010) (internal quotation 

marks and citations omitted). See also United States v. Plavcak, 411 F.3d 655, 660-61 (6th Cir. 

2005).

In this appeal, the Trustee argues that “the amendment to the Tennessee Code is directed 

specifically and exclusively to bankruptcy matters and, therefore, is not a nonbankruptcy law.” 

(Br. of Appellee Henry E. Hildebrand, III, Ch. 13 Tr. at 2, BAP No. 15-8009 ECF No. 19). The 

Panel agrees. The bankruptcy court rejected the Trustee’s argument, holding: 

The plain, straightforward meaning of the statute is that governmental creditors 

are permitted to be paid on their bankruptcy claims based on the interest rate set 

by local, state, or federal law outside the Bankruptcy Code. The plain language 

reflects that the reference to “applicable nonbankruptcy law” is nothing more or 

less than a distinction between provisions of the Bankruptcy Code versus laws 

found elsewhere that govern interest rates on delinquent taxes.

In re Bratt, 527 B.R. 303, 308 (Bankr. M.D. Tenn. 2015) (emphasis in original). The Panel finds 

the bankruptcy court’s definition of “nonbankruptcy law” too broad, and thus, its definition of 

“bankruptcy law” too narrow. The provisions of the Bankruptcy Code are clearly bankruptcy 

laws. However, this axiom does not require the conclusion that every law found outside of the 

Bankruptcy Code is a nonbankruptcy law. 

In Richardson v. Schafer (In re Schafer), 689 F.3d 601, 606 (6th Cir. 2012), the Sixth 

Circuit considered whether Michigan’s bankruptcy-specific exemption statute was constitutional. 

In Schafer, the bankruptcy trustee argued that it was not constitutional because “Michigan’s 

bankruptcy–specific exemption statute is a ‘bankruptcy law’” and only the federal government 

can enact bankruptcy laws. Schafer, 689 F.3d at 605. The Sixth Circuit rejected the argument 

that only the federal government can enact bankruptcy laws. A large portion of the Schafer
Nos. 15-8009/8010 In re Bratt Page 7

opinion reviews the appropriate circumstances under which states can create bankruptcy laws. In 

holding the bankruptcy-specific exemption statute constitutional, the Sixth Circuit noted that 

under the precedents established by Rhodes v. Stewart, 705 F.2d 159 (6th Cir. 1983) and Hood v. 

Tennessee Student Assistance Corp., 319 F.3d 755 (6th Cir. 2003), aff’d on other grounds,

541 U.S. 440, 124 S. Ct. 1905 (2004), “the states retain the power to act where the federal 

government has declined to do so (Hood) or where, as in the area of exemptions, it has decided 

to permit the states to act (Rhodes).” Schafer, 689 F.3d at 606. Thus, Schafer can be fairly read 

as holding that a state promulgated bankruptcy-specific statute is, in fact, a bankruptcy law.2

In HSBC Bank USA v. Branch (In re Bank of New England Corp.), 364 F.3d 355 (1st Cir. 

2004), the First Circuit Court of Appeals looked at the phrase “applicable nonbankruptcy law” as 

used in Bankruptcy Code § 510, governing subordination clauses. The First Circuit noted that:

One thing seems very clear: in keeping with the principle that bankruptcy is an 

area of distinct federal competence, Congress has conferred on the federal courts 

the power to apply any and all generally applicable state rules of contract 

interpretation in construing subordination agreements. But section 510(a) does 

not vest in the states any power to make bankruptcy-specific rules: the statute’s 

clear directive for the use of applicable nonbankruptcy law leaves no room for 

state legislatures or state courts to create special rules pertaining strictly and 

solely to bankruptcy matters.

HSBC Bank, 364 F.3d at 364 (emphasis in original)(citations omitted). The same principle 

applies to § 511. Section 511 instructs bankruptcy courts to apply a generally applicable tax 

interest rate, but its clear directive for the use of applicable nonbankruptcy law leaves no room 

for the creation or application of a special tax interest rate pertaining strictly and solely to 

bankruptcy matters.3

 2

Schafer clearly demonstrates that the Bankruptcy Code’s deferral to state and local law under certain 

circumstances does not automatically authorize a state to enact bankruptcy-specific legislation. In fact, in Schafer, 

the Sixth Circuit acknowledged a difference between the exemption opt-out provision (§ 522(b)--permitting 

bankruptcy-specific exemption statutes) and instances in which the Bankruptcy Code only defers to generally 

applicable non bankruptcy-specific laws on a broader spectrum (§§ 346(b ), 506(b)). Schafer, 689 F.3d at 608.

3

Although not determinative, the bankruptcy court’s determination that the phrase “applicable 

nonbankruptcy law” encompasses everything outside of the Bankruptcy Code, including state laws that are 

bankruptcy-specific, would turn the definition of “nonbankruptcy” on its head. The phrase “applicable nonbankruptcy law” appears thirty-two times in the Bankruptcy Code. In re Morrell, 394 B.R. 405, 416 (Bankr. N.D. 
Nos. 15-8009/8010 In re Bratt Page 8

Simply stated, § 511’s plain language requires bankruptcy courts to use an interest rate 

that is determined under nonbankruptcy law. Subsection (d) of the Tennessee statute is a 

bankruptcy law because it creates an interest rate that is only used in bankruptcy cases. 

Therefore, under § 511’s plain meaning, Subsection (d) cannot be applied to determine the 

interest rate.

Due to the conclusion that Subsection (d) is not applicable to determine the tax interest 

rate under § 511, the Panel does not reach the question of whether T.C.A. § 67-5-2010(d) is 

constitutional. “Under the doctrine of constitutional avoidance, federal courts should avoid

federal constitutional determinations when a case can be resolved on other grounds.” Toth v. 

Callaghan, 995 F. Supp. 2d 774, 780 (E.D. Mich. 2014), appeal dismissed, (July 8, 2014) (citing 

Siler v. Louisville & Nashville R.R. Co., 213 U.S. 175, 193, 29 S. Ct. 451 (1909)). 

Supreme Court precedent makes it clear that courts should avoid unnecessary 

adjudication of constitutional issues. Ashwander v. TVA, 297 U.S. 288, 347, 56 S. 

Ct. 466, 80 L. Ed. 688 (1936) (Brandeis, J., concurring) (“[I]f a case can be

decided on either of two grounds, one involving a constitutional question, the 

other a question of statutory construction or general law, the Court will decide 

only the latter.”). Where a statutory or nonconstitutional basis exists for reaching 

a decision, as it does here, it is not necessary to reach the constitutional issue. 

See, e.g., Montenegro v. United States, 248 F.3d 585, 595-96 (7th Cir. 2001) 

(avoiding the question of the constitutionality of the statute of limitations of 

§ 2255).

Brown v. United States, 20 F. App’x 373, 374 (6th Cir. 2001).

V. CONCLUSION

The Panel holds that T.C.A. § 67-5-2010(d), a bankruptcy-specific statute, is a 

bankruptcy law. Therefore, Subsection (d) may not be used to determine the applicable tax 

interest rate pursuant to § 511. The bankruptcy court’s determination that the applicable tax rate 

is 12% pursuant to T.C.A. § 67-5-2010(a)(1) is AFFIRMED.

 

W. Va. 2008). To hold that states are authorized to create a bankruptcy-specific law every time the phrase 

“applicable nonbankruptcy law” is used would fly in the face of Schafer’s admonition.