High Court Gives Creditors of Bankrupt Firms a Break

The Supreme Court, in a victory for the federal government, today made it easier for some creditors to collect more money from companies that declare bankruptcy.

The court, by a 5-4 ruling in a case from Detroit, said the government is entitled to certain interest payments on taxes owed by a bankrupt company.

The case stems from a petition filed by Ron Pair Enterprises before a bankruptcy judge in Detroit in 1984.

The government said the company owed it $53,278 in taxes, penalties and interest accrued before the filing of the bankruptcy petition.

The company agreed to pay the amount but refused to pay additional interest accrued after the filing of the petition.

The government said the company should pay the post-filing interest because the collateral, tax liens on company property, that secure the debt owed the government exceed the amount of the original debt.

The Supreme Court today agreed, and overturned a ruling by the U.S. 6th Circuit Court of Appeals against the government.

Justice Harry A. Blackmun, in his opinion for the court, said the bankruptcy code, which was revised by Congress in 1978, permits post-filing interest payments in such cases.