# Opinion

> United States Bankruptcy Court, S.D. New York · July 21, 2026

URL: https://www.frixlaw.com/law-library/cases/11409384

## Case

- **Full name:** In re: 1300 Desert Willow Road, LLC
- **Court:** United States Bankruptcy Court, S.D. New York
- **Decided:** July 21, 2026
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------x
)
In re: ) Chapter 11
)
1300 Desert Willow Road, LLC, ) Case No. 25-11375 (PB)
)
Debtor. ) FOR PUBLICATION
---------------------------------------------------------------x

BENCH DECISION ON DEBTOR’S OBJECTION TO ROMSPEN’S SECURED CLAIM1

APPEARANCES:

BRONSON LAW OFFICES, P.C.
Counsel for the Debtor
480 Mamaroneck Avenue
Harrison, NY 10528-0023
By: H. Bruce Bronson, Jr.

BRYAN CAVE LEIGHTON PAISNER LLP
Counsel for Romspen Investment, LP
301 S. College Street, Suite 2150
Charlotte, NC 28202
By: Jarret P. Hitchings
Katie Spewak

Hon. Philip Bentley
U.S. Bankruptcy Judge

1 This decision was initially dictated on the record of the April 27, 2026 hearing in this case. The Court has edited the
transcript of that bench ruling to improve its readability and structure, to add a number of additional legal citations,
and to reflect the Debtor’s subsequent withdrawal of certain of its objections to Romspen’s claim. In addition, the
Court has expanded its discussion of a significant unsettled legal issue: whether the requirement of Bankruptcy Code
§ 506(b) that fees, costs and other charges allowed to oversecured creditors be “reasonable” applies to prepetition, as
well as postpetition, charges.
Given this decision’s origins as a bench ruling, it has a more conversational tone than a memorandum decision.
INTRODUCTION

We are here on the Debtor’s objection to the secured claim of its lender, Romspen
Investment LP (“Romspen”). The Debtor has objected to Romspen’s claim on a number of
grounds. Specifically, the Debtor challenges the inclusion of default interest, late fees and
forbearance fees, and it argues that interest should be computed on a simple, rather than compound,
basis.2
The charges to which the Debtor objects accrued both prepetition and postpetition. It is
undisputed that the postpetition amounts are subject to Bankruptcy Code § 506(b)’s requirement

that fees allowed to an oversecured lender be reasonable. However, the case law is divided as to
whether prepetition amounts are also subject to that reasonableness requirement or instead are
governed by state law (in this case, New York law), which generally does not authorize courts to
review parties’ agreements for reasonableness. I find that the text of section 506(b), when read in
conjunction with section 502(b), is ambiguous, and that several considerations compel a narrow
construction of section 506(b), limiting its reasonableness standard to postpetition amounts.
Applying New York law to prepetition amounts and section 506(b) to postpetition amounts,

I will (i) disallow Romspen’s claim for both prepetition and postpetition late fees, (ii) allow
Romspen’s claim for prepetition forbearance fees, and (iii) allow Romspen’s claim for postpetition
default interest. (The Debtor does not object to Romspen’s claim for prepetition default interest.)
In addition, I find that Romspen’s loan documents provide for interest to be computed on a simple,
rather than compound, basis.

2 The Debtor had previously objected to Romspen’s attorneys’ fees and to the accuracy of Romspen’s claim
calculations. After the April 27 hearing, the Debtor withdrew those portions of its claim objection.
For purposes of this decision, I assume that Romspen is oversecured, as the appraisals filed
by the parties during this case indicate. However, the Debtor’s sole property is currently being
marketed for sale, and a sale hearing is scheduled to be heard in September. In these circumstances,
it would not be appropriate for me to rule now on whether Romspen is oversecured. Instead, that
issue will be determined by the outcome of the sale. That is, Romspen will be entitled to

postpetition interest to the extent, but only to the extent, the sale proceeds cause it to be
oversecured.
FACTUAL AND PROCEDURAL BACKGROUND
My ruling assumes familiarity with the facts of this case, which I set forth in some detail
in my recent decision, In re 1300 Desert Willow Rd., LLC, 677 B.R. 176 (Bankr. S.D.N.Y. 2026).

For today’s ruling, I will briefly summarize the facts most directly relevant to the issues before
me.
The Debtor is a single-asset real estate entity, which was formed to acquire a light industrial
manufacturing facility located in Los Lunas, New Mexico. In April 2022, the Debtor refinanced
its debt by taking out a $20 million loan, secured by a first mortgage on that property, from
Romspen, a real estate investment firm. Later that year, after a number of tenants vacated the
property, the Debtor failed to make payments due under the loan, and the loan became fully due
and payable. Romspen scheduled the property for a foreclosure sale but then entered into a series

of forbearance agreements with the Debtor, which remained in place for a bit more than two years.
In June 2025, after the last forbearance agreement had lapsed and with a foreclosure sale finally
imminent, the Debtor filed its chapter 11 petition.
Romspen is the Debtor’s only secured creditor, and its only substantial creditor of any sort.
It asserts a claim of approximately $26 million as of the petition date, consisting of about $20
million of principal and $6 million in interest and other charges. The only general unsecured claims
that have been filed and not disallowed are the claims of two law firms that had represented the
Debtor prepetition; their claims total a bit less than $60,000. Administrative and priority claims
are not expected to be substantial. As a result, Romspen holds the vast majority of the claims
against the Debtor, and there is a very good chance that, if Romspen turns out to be oversecured,

the Debtor will be solvent.
I confirmed Romspen’s liquidating plan for the Debtor on March 31, 2026. Prior to
confirming that plan, I had ruled that the Debtor’s plan was not likely to be confirmable, and for
that and other reasons, I allowed Romspen to proceed to confirmation with its plan while putting
the Debtor’s plan on hold. See 1300 Desert Willow, 677 B.R. at 183–87. In connection with my
order confirming Romspen’s plan, I approved bidding procedures for the sale of the Debtor’s
property, with a bid deadline of August 10, 2026 and a sale hearing to follow.

Let me turn now to the record with respect to the claim objection on which I’m ruling
today. The Debtor filed a claim objection and later a reply. Romspen filed a single response. The
Debtor filed one declaration and Romspen filed two declarations in connection with their
respective pleadings. Romspen also filed a supplemental appendix attaching certain Canadian legal
authorities.

On April 23, 2026, I held a non-evidentiary hearing, pursuant to Local Bankruptcy Rule
9014-2, at which counsel for Romspen and the Debtor appeared. As I usually do at such hearings,
I asked the parties whether they wished to present any evidence beyond what they had already
filed in connection with their motion papers. Both parties told me essentially the same thing—
namely, that they did not wish to present any further evidence and did not believe an evidentiary
hearing was needed, provided they could resolve their disputes over the reasonableness of
Romspen’s attorney’s fees and the arithmetical accuracy of its claim calculations. The parties have
since resolved those issues, and the Debtor has withdrawn its objections on those two points.

GOVERNING LEGAL STANDARDS
Before turning to the Debtor’s specific objections to Romspen’s claim, I will address
several threshold legal topics: (i) the Bankruptcy Code standards governing the allowance of fees,
costs and other charges that accrue in favor of an oversecured creditor; (ii) the relevant standards
under New York law; and (iii) the burden of proof for claim objections under the Bankruptcy Code.
I. The Treatment of Oversecured Creditors’ Claims Under Bankruptcy Code §§ 506(b)
and 502(b)
The Bankruptcy Code treats claims that arise prepetition differently than claims that arise
postpetition. Section 502(b) provides that a claim is determined “as of the date of the filing of the
petition.” 11 U.S.C. § 502(b). As a result, postpetition interest and other postpetition charges are

generally excluded from the claim and not allowed. See, e.g., Pension Ben. Guar. Corp. v. Oneida
Ltd., 562 F.3d 154, 157 (2d Cir. 2009) (“[T]he existence of a valid bankruptcy claim depends on
(1) whether the claimant possessed a right to payment, and (2) whether that right arose before the
filing of the petition.” (internal quotation marks and citation omitted)). In addition, absent a
specific Bankruptcy Code provision to the contrary, see, e.g., 11 U.S.C. §§ 502(b)(1)-(9), 502(c)-
(k), the allowability of the claim is determined by nonbankruptcy law. See 11 U.S.C. § 502(b)(1)
(a court shall allow a claim “except to the extent that—(1) such claim is unenforceable against the
debtor and property of the debtor, under any agreement or applicable law”); see also Pension Ben.
Guar. Corp., 562 F.3d at 157 (“To make these [claim allowance] determinations, we look to the

substantive nonbankruptcy law that gives rise to the debtor's obligation.”).
The rule that claims are fixed as of the petition date is subject to certain limited exceptions,
one of which—the one relevant here—is contained in section 506(b). That section permits an
oversecured creditor to recover “interest on such claim, and any reasonable fees, costs, or charges
provided for under the agreement or State statute under which such claim arose.”
11 U.S.C. § 506(b). It is settled that this provision allows an oversecured creditor to recover

postpetition interest, plus any reasonable postpetition fees or other charges, to the extent the value
of the creditor’s collateral covers those amounts. See, e.g., In re Rosado, 2025 WL 1520515, at *6
(Bankr. S.D.N.Y. 2025). Whether this provision has any effect on the prepetition portions of an
oversecured creditor’s claim is the issue now before the Court. Specifically, does section 506(b)’s
reference to “reasonable fees, costs, or charges” impose a reasonableness limitation on the
creditor’s prepetition fees and other charges, or does it merely limit the postpetition charges the
creditor can recover?

I am unaware of any decisions in this district that have squarely addressed this issue.3 In
other jurisdictions, the case law is divided. Two courts of appeal—for the Fifth and Eleventh
Circuits—have each ruled that the text of section 506(b) unambiguously requires the application
of that section’s reasonableness standard to prepetition, as well as postpetition, charges. See In re
Welzel, 275 F.3d 1308, 1314 (11th Cir. 2001) (en banc) (“Section 506(b) . . . does not draw a
distinction between fees vested pre- or post-petition . . . . Instead, the subsection refers blanketly
to ‘reasonable fees,’ without differentiation based on the time the fees vested.”); see also Wells
Fargo Bank, N.A. v. 804 Congress L.L.C. (In re 804 Congress, L.L.C.), 756 F.3d 368, 374–75 (5th

3 Two decisions in this district have applied section 506(b)’s reasonableness standard to prepetition fees. See In re
243rd St. Bronx R&R, LLC, 2013 WL 1187859, at *2 (Bankr. S.D.N.Y. 2013); In re Vest Assocs., 217 B.R. 696, 700
(Bankr. S.D.N.Y. 1998). However, neither decision explains its basis for doing so, and it appears that the application
of that standard to prepetition fees may not have been disputed in either case.
Cir. 2014) (following Welzel on this issue). Notably, neither of these decisions makes any mention
of the tension between their reading of section 506(b) and the text of section 502(b), which allows
prepetition charges to the full extent provided by state law.

Outside the Fifth and Eleventh Circuits, a number of lower courts have disagreed with
those two courts of appeal. According to a 2011 New Jersey bankruptcy court decision:
The majority rule is that the allowability of pre-petition interest, fees,
costs, and penalties “as part of the secured creditor’s ‘claim’ is not
determined by section 506, but is governed by section 502 in conjunction
with other provisions of the Code.” See 4 COLLIER ON BANKRUPTCY
¶ 506.04[1] (Alan N. Resnick and Henry J. Sommer eds., 16th ed.)
In re Wesley, 455 B.R. 383, 386 (Bankr. D.N.J. 2011) (collecting authorities); see also, e.g., In re
Nunez, 317 B.R. 666, 670 (Bankr. E.D. Pa. 2004) (“Quite simply, interest, fees and costs arising
pre-petition are already a part of a secured creditor’s proof of claim in the first instance rendering
section 506(b) inapplicable.”); In re Vanderveer Ests. Holdings, Inc., 283 B.R. 122, 131 (Bankr.
E.D.N.Y. 2002) (“Interest, fees, costs and charges arising pre-petition are part of the secured
creditor’s claim in the first instance, and are therefore not governed by § 506(b).”).
The text of section 506(b) does not provide a clear answer to this issue. When that section
is read in the context of related Bankruptcy Code sections—section 502(b) in particular—the
conclusion that section 506(b) is ambiguous is inescapable. See Drawbridge Special Opportunities
Fund LP v. Barnet (In re Barnet), 737 F.3d 238, 250 (2d Cir. 2013) (“In determining whether
statutory language is ambiguous, we reference the language itself, the specific context in which
that language is used, and the broader context of the statute as a whole.” (internal quotation marks
and citation omitted)); see also Gonzales v. Carhart, 550 U.S. 124, 152 (2007) (courts must “use
the ordinary meaning of [statutory] terms unless context requires a different result”). On the one
hand, section 506(b)’s reasonableness requirement on its face applies to all fees, costs and charges
provided for by agreement or statute, without any temporal limitation. On the other hand, as courts
have observed, see, e.g., In re Wesley, 455 B.R. at 386, a broad reading of this provision, so as to
impose a reasonableness limitation on prepetition as well as postpetition charges, conflicts with
section 502(b)’s allowance of prepetition charges to the full extent provided by nonbankruptcy
law.

Two considerations compel adoption of the narrower construction of section 506(b)’s
reasonableness requirement that courts outside the Fifth and Eleventh Circuits have adopted. First,
this interpretation harmonizes that section with section 502(b) in a manner consistent with the text
of both sections. See Auburn Hous. Auth. v. Martinez, 277 F.3d 138, 144 (2d Cir. 2002) (“[T]he
preferred meaning of a statutory provision is one that is consonant with the rest of the statute.”)
(Katzmann, C.J.). Section 502(b) can only be read one way: It unambiguously provides for the
allowance of all prepetition claims recoverable under nonbankruptcy law, regardless of whether

the bankruptcy court might consider the claim unreasonable. In contrast, section 506(b)’s
reasonableness requirement can plausibly be read either broadly or narrowly—that is, either to
apply to all claims, prepetition as well as postpetition, or to apply only to the specific postpetition
sums that section 506(b) adds to the creditor’s section 502(b) claim. The narrower of these two
interpretations is preferable, because unlike the broader interpretation, it is consistent with the
plain meaning of section 502(b).
A second, equally compelling reason to reject a broad construction of section 506(b) is that

that interpretation produces an absurd result: It treats oversecured creditors less favorably than
undersecured creditors with respect to their prepetition claims. Specifically, this interpretation
deprives oversecured creditors—but not undersecured creditors—of any portion of their
prepetition claim that the bankruptcy court finds to be unreasonable. As a result, an oversecured
creditor could get a lower recovery than an undersecured creditor with an identical claim.

To take an extreme example, imagine two secured creditors with identical claims for
$1 million, one of which is slightly oversecured (its collateral is worth $1,001,000), the other of
which is slightly undersecured (its collateral is worth $999,000). Imagine further that a substantial
prepetition portion of each creditor’s claim—say $100,000—is allowable under state law but
would be deemed unreasonable by the bankruptcy court. Under the interpretation of section 506(b)
adopted by the two courts of appeal, the undersecured creditor would receive an allowed secured
claim of $999,000 (the value of its collateral), but the oversecured creditor would get an allowed
secured claim of only $900,000—a topsy-turvy result.

It could be argued that bankruptcy policy disfavors the payment of unreasonably large fees
to oversecured creditors, particularly when unsecured creditors are being paid only pennies on the
dollar. This is a legitimate and important concern. However, the imposition of a reasonableness
requirement on the prepetition fees of oversecured, but not undersecured, creditors is not a coherent
or a textually supported solution to this issue. The only conclusion that makes sense and is
consistent with the Bankruptcy Code’s text is that Congress chose not to impose a reasonableness
requirement on the prepetition claims of any secured creditors, whether oversecured or
undersecured.4

4 In this respect, the Code’s treatment of secured claims mirrors its treatment of general unsecured claims, which
similarly are not subject to a general reasonableness requirement. As already noted, such claims are generally allowed
to the full extent provided by nonbankruptcy law, see 11 U.S.C. § 502(b)(1), absent a specific Bankruptcy Code
provision to the contrary, see, e.g., 11 U.S.C. §§ 502(b)(1)-(9), 502(c)-(k). Only a small number of these Bankruptcy
Code exceptions impose a reasonableness requirement. See, e.g., 11 U.S.C. § 502(b)(4) (“[A] claim . . . for services
of an insider or attorney of the debtor [may not] exceed[] the reasonable value of such services.”).
For these reasons, I conclude that section 506(b)’s reasonableness requirement applies only
to postpetition fees and other charges. Charges that accrue prepetition in favor of an oversecured
creditor are allowed to the full extent provided by nonbankruptcy law.

II. New York Law Concerning the Enforcement of Contractual Agreements
This brings me to the second threshold legal topic: the legal standards governing the
enforcement of parties’ agreements under New York law.5 As the New York Court of Appeals has
held, “it is a deeply rooted principle of New York contract law that parties may contract as they
wish . . . in the absence of some violation of law or transgression of a strong public policy.”
2138747 Ontario, Inc. v. Samsung C&T Corp., 31 N.Y.3d 372, 377 (N.Y. 2018) (internal quotation
marks and citations omitted); see also 159 MP Corp. v. Redbridge Bedford, LLC, 33 N.Y.3d 353,

359–60 (N.Y. 2019) (citing New England Mut. Life Ins. Co. v. Caruso, 73 N.Y.2d 74, 81 (N.Y.
1989)).
Consistent with this principle, New York courts generally enforce contractual agreements
according to their terms, particularly when the contract is the product of arms’ length negotiations
between sophisticated parties, as was the case here. See Oppenheimer & Co. v. Oppenheim, Appel,
Dixon & Co., 86 N.Y.2d 685, 695 (N.Y. 1995) (“Freedom of contract prevails in an arm’s length
transaction between sophisticated parties . . . and in the absence of countervailing public policy
concerns there is no reason to relieve them of the consequences of their bargain.”); see also 159

MP Corp. v. Redbridge Bedford, LLC, 33 N.Y.3d 353, 359-60 (N.Y. 2019) (public policy requires
“disfavoring judicial upending of the balance struck at the conclusion of the parties’ negotiations”

5 Romspen’s note is governed by New York law.
as that “promotes certainty and predictability and respects the autonomy of commercial parties in
ordering their own business arrangements”).

This general rule is subject to a limited number of exceptions. The Debtor has argued that
two of those exceptions apply here: New York’s prohibition on usurious contracts, and its rule that
liquidated damages provisions that operate as penalties will not be enforced.
New York’s usury rules are set forth in two statutes, the General Obligations Law and the
Penal Law. See N.Y. GEN. OBLIG. LAW § 5-521(1); N.Y. PENAL LAW § 190.40. Under these statutes,
loans of less than $2.5 million to a business are deemed usurious if they exceed the 25 percent
criminal usury rate. See N.Y. PENAL LAW § 190.40; see also Alleon Cap. Partners, LLC v.
Choudhry, 225 A.D.3d 578, 580 (2d Dep’t 2024) (“[T]he defense of usury is not available to

corporations, but this bar does not preclude a corporate borrower from raising the defense of
‘criminal usury’ (i.e., interest over 25%) in a civil action.” (citing Adar Bays, LLC v. GeneSYS ID,
Inc., 37 N.Y.3d 320 (N.Y. 2021)).
In contrast, loans above $2.5 million to a business are not subject to any usury restrictions.
See Alleon Cap. Partners, 225 A.D.3d at 580 (“[C]ivil and criminal usury laws do not apply to any
loan or forbearance in the amount of [$2,500,000] or more.” (internal quotation marks and citation
omitted)). This appears to reflect a legislative judgment that large commercial transactions

generally involve sophisticated parties, which do not need the same degree of protection as do
borrowers that take out smaller loans. See Adar Bays, 37 N.Y.3d at 331 (N.Y. 2021) (“The
legislative history of the 1980 amendment . . . evidences the legislature’s judgment that borrowers
of more than $2.5 million were capable of protecting their own interests without the protection of
the usury laws.” (internal quotation marks and citation omitted)). The loan to this Debtor was in
the amount of approximately $20 million, far above the usury cap, so it is clear that New York’s
usury laws do not apply.

As for liquidated damages provisions, New York law provides that such provisions are
enforced unless found to function as an impermissible penalty. In the seminal case on this issue,
Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420 (N.Y. 1977), the Court of
Appeals ruled that “[p]arties to a contract have the right to agree to [liquidated damages] clauses
provided that the clause is neither unconscionable nor contrary to public policy . . . and public
policy is firmly set against the imposition of penalties or forfeitures.” Truck Rent-A-Ctr., 41 N.Y.2d
at 424 (citing Mosler Safe Co. v. Maiden Lane Safe Deposit Co., 199 N.Y. 479, 485 (N.Y. 1910)
and City of Rye v. Pub. Serv. Mut. Ins. Co., 34 N.Y.2d 470, 472–73 (N.Y. 1974)).

III. The Burden of Proof for Claim Objections
The burden of proof for claim objections requires only brief discussion, as these legal
standards are well-known and not disputed by the parties.
Section 502(a) of the Bankruptcy Code provides that a filed proof of claim is “deemed
allowed, unless a party in interest . . . objects.” 11 U.S.C. § 502(a). It is settled that claim objections

are subject to a “shifting burden of proof.” In re Genco Shipping & Trading Ltd., 2015 WL
2444152, at *2 (Bankr. S.D.N.Y. 2015). A claim is prima facie valid if properly filed. See Fed. R.
Bankr. P. 3001(f); see also In re Reilly, 245 B.R. 768, 773 (B.A.P. 2d Cir. 2000), aff’d, 242 F.3d
367 (2d Cir. 2000); In re Genco, 2015 WL 2444152, at *2. To overcome that prima facie effect,
the objecting party must come forward with evidence that, if credited, would refute at least one of
the allegations essential to the claim. See In re Reilly, 245 B.R. at 773.
If the objector does so by producing evidence at least equal in force to the prima facie case,
the presumption of validity is overcome, and the burden shifts back to the claimant. At that point,
the claimant must prove, by a preponderance of the evidence, that the claim is allowable under
applicable law. See Creamer v. Motors Liquidation Co. GUC Trust (In re Motors Liquidation Co.),
2013 WL 5549643, at *3 (S.D.N.Y. 2013); see also In re Genco, 2015 WL 2444152, at *2.

THE DEBTOR’S OBJECTIONS TO ROMSPEN’S CLAIM
Turning now to the specifics of the Debtor’s claim objection, I will address first the
Debtor’s objections to claim amounts that accrued between July 21, 2023 and the petition date;
then its objections to amounts that accrued after the petition date; and finally, the issue of
compound versus simple interest.

I. Romspen’s Prepetition Claim Amounts
The Debtor has objected to all of Romspen’s prepetition late fees and forbearance fees.6
However, by agreement dated July 21, 2023 (the second forbearance agreement), the Debtor and
Romspen agreed on the amounts that the Debtor owed Romspen as of that date, including the
specific amounts of late fees and forbearance fees that had accrued. The Debtor has not challenged
the enforceability of that agreement. Consequently, I will treat the amounts of late fees and

forbearance fees owed as of July 21, 2023 as fixed by that agreement, and I will consider only the
Debtor’s objections to fees that accrued after that date.
For the reasons I will now explain, I am going to disallow Romspen’s claim for late fees
that accrued between July 21, 2023 and the petition date, and to allow its claim for forbearance

6 The Debtor initially objected to Romspen’s claim for prepetition default interest as well, but at the April 27, 2026
hearing, the Debtor withdrew that objection.
fees that accrued during that period. In addition, I will allow all sums to which the parties stipulated
in the second forbearance agreement.

A. Late fees
The note provides for two different types of late fees. One is a 5 percent charge for each
late payment. According to Romspen, those amounts totaled approximately $338,000 as of the
petition date. A portion of that $338,000 amount, namely about $106,000, was fixed by the July
21, 2023 forbearance agreement; my ruling will address only the portion of these fees that accrued
after that. The second type of late fee is a lump sum late fee that accrues upon maturity or
acceleration of the note. That late fee is calculated as 0.5 percent of the principal balance of $20.1
million, or $100,500. That $100,500 sum was assessed prior to July 21, 2023 and is included in

Schedule 1 to the second forbearance agreement. In other words, that is one of the amounts to
which the Debtor agreed when it entered into that forbearance agreement. I will therefore deny the
objection to the extent it seeks to challenge that amount.
The Debtor argues that the prepetition late fees constitute an unenforceable penalty under
New York law. I agree. The New York Court of Appeals held, in its Truck decision, that contractual
payments that constitute penalties are unenforceable. See Truck Rent-A-Ctr., 41 N.Y.2d at 424
(“[P]ublic policy is firmly set against the imposition of penalties or forfeitures for which there is
no statutory authority.”). Although the Truck case involved liquidated damages, not late fees, the

standard adopted by the Court of Appeals in that case appears to apply more broadly. That is, the
court in Truck didn’t limit its analysis to liquidated damages.
New York courts that have addressed late fees have applied a similar standard. They have
stricken late fees when they found them to compensate the lender for the same costs as default
interest and therefore to function as penalties. See, e.g., Beltway 7 Props., Ltd. v. Blackrock Realty
Advisers, Inc., 167 A.D.3d 100, 106–7 (1st Dep’t 2018) (applying liquidated damages doctrine to
late charges and finding that further factual development was required to determine whether the
late charge was an unenforceable penalty).

However, the New York courts don’t appear to apply this test on an across-the-board basis.
That is, they don’t appear to rule that late fees always duplicate default interest. Rather, they appear
to apply this legal standard on a case-by-case basis and to decide in each individual case whether
the late fee duplicates the default interest and is therefore impermissible. See id.; see also, e.g.,
Novendstern v. Mount Kisco Med. Grp., 177 A.D.2d 623, 625 (2d Dep’t 1991) (striking a
duplicative claim for fees as an unenforceable penalty).
In this case, the only evidence the parties have presented on this issue is the language of

the note. In particular, Romspen points to recitals in sections 2.1 and 2.3, which it claims support
the conclusion that default interest and late fees under the note serve different purposes.
I don’t agree. The purposes set forth in the note with respect to late fees and default interest
are very similar. Late fees are described in section 2.1 as being to “defray the expense incurred by
[Romspen] in handling and processing such delinquent payment and to compensate [Romspen] for
the loss of the use of such delinquent payment.” Mestrezat Decl. (ECF No. 13), Ex. 4, § 2.1. Section
2.3 of the note says that default interest is “given for the purpose of compensating [Romspen] at

reasonable amounts for [its] added costs and expenses that occur as a result of [the Debtor’s]
default and that are difficult to predict in amount, such as increased general overhead,
concentration of management resources on problem loans, and increased cost of funds.” Id. at §
2.3.
Those strike me as roughly the same purposes. While the wording is different, the substance
is essentially the same. The stated purposes of both the late fees and the default interest are to
compensate Romspen for, one, the additional administrative expense of dealing with the defaulted
loan and, two, the loss of the use of the funds that the Debtor failed to pay. Because these purposes
are at bottom the same, I find that the late fees incurred between July 21, 2023 and the petition
date are duplicative of the default interest and therefore constitute an unenforceable penalty under
New York law.

It is clear that the same result would follow if the allowability of the prepetition late fees
were governed by section 506(b)’s reasonableness standard, rather than by New York law. In the
first place, as a general matter, section 506(b)’s requirement that fees be reasonable is more
stringent than New York’s requirement that the fees not constitute a penalty, so it is to be expected
that any fees that fail under the New York standard would also fail under the section 506(b)
standard. More specifically, courts that have applied section 506(b) to late fees have consistently
held, at least in this district, that a secured creditor is not entitled to receive both default interest

and late fees because those sorts of charges duplicate each other and are therefore unreasonable.
See In re 785 Partners LLC, 470 B.R. 126, 137 (Bankr. S.D.N.Y. 2012) (“The decisional law is
uniform that oversecured creditors may receive payment of either default interest or late charges,
but not both.” (quoting In re Vest Assocs., 217 B.R. 696, 701 (Bankr. S.D.N.Y. 1998))).
Fo these reasons, I will disallow Romspen’s claim for late fees that accrued between July
21, 2023 and the petition date.

B. Forbearance fees
As already noted, the Debtor and Romspen entered into a series of forbearance agreements
in the years before the Debtor’s bankruptcy filing, which collectively required Romspen to forbear
for slightly more than two years, from late January 2023 to late February 2025. In connection with
those agreements, Romspen charged the Debtor a number of forbearance fees. Romspen’s proof
of claim stated that $100,000 of those fees remained unpaid. Romspen has since corrected that
amount to say that $150,000 of those fees remain unpaid.

There were additional forbearance fees, in larger amounts, that Romspen charged and the
Debtor paid. As to those fees, the Debtor is asking me to credit those in reduction of its debt to
Romspen. However, a substantial majority of those fees were not real fees—that is, they were not
charges incurred by the Debtor by virtue of failing to pay on time. Rather, they were agreements
by the Debtor to pay down its debt to Romspen by specified amounts. For instance, the January
24, 2023 agreement provided that both the $600,000 “forbearance fee” and the $225,000
“extension fee” were to be credited to the loan balance. See Mestrezat Decl. (ECF No. 13), Ex. 12,
§§ 5(d), 6(c). I don’t consider payments of this sort to be fees. They are mandatory repayments of
part of an overdue debt, not fees. The real fees totaled slightly more than $500,000, specifically
$508,334, of which $150,000 remains unpaid. Those are the fees I will consider.

The Debtor has not shown that the forbearance fees violate governing New York law
standards. In the first place, the total amount of forbearance fees was not enormous—only a bit
more than $500,000—in exchange for which the Debtor got two years of forbearance. This sum
doesn’t strike me on its face as grossly disproportionate to the financial risk Romspen took on by
forbearing for two years from enforcing its remedies with respect to its defaulted $20 million loan.

Of course, this is an issue of fact. What’s dispositive is that the Debtor has not presented
any evidence to support a finding that this sum was grossly disproportionate to the risks involved.
For example, the Debtor has not offered the testimony of a financial advisor to say that the
forbearance fees Romspen charged were greater than the forbearance fees that lenders generally
charge—that is, that the fees were above market. I am not aware of any facts that would support
the conclusion that the forbearance fees Romspen charged were above market or unreasonable in
any way.

I therefore find that these fees were reasonable. They would be allowable under section
506(b), and even more clearly, they are allowable under New York law. The Debtor has not
identified any New York standard more stringent than 506(b)’s reasonableness test. To the contrary,
the only New York standard that could potentially override the parties’ loan agreement—the rule
that liquidated damages that operate as penalties will be disallowed—sets a much higher bar than
mere unreasonableness.
In addition, it is far from clear that this New York rule applies to forbearance fees. New
York courts routinely uphold forbearance agreements. See 3052 Brighton 1st St. II, LLC v. 3052

Brighton First, LLC, 212 A.D.3d 695, 696 (2d Dep’t 2023) (“A forbearance agreement will
generally be enforced according to its terms where . . . it is unambiguous.”). Moreover, forbearance
agreements serve different purposes than liquidated damages provisions. “Liquidated damages are
an estimate, made by the parties at the time they enter into their agreement, of the extent of the
injury that would . . . result [from] breach of the agreement.” In re Helios & Matheson Analytics,
Inc., 633 B.R. 115, 119 (Bankr. S.D.N.Y. 2021) (internal quotation marks and citations omitted).
Forbearance fees compensate lenders for something quite different. A lender that forbears

agrees to refrain from exercising its contractual remedies for a specified period of time. In broad
terms, forbearance agreements accomplish what the automatic stay accomplishes in bankruptcy:
They require the lender to delay enforcement of its contractual remedies, thereby undertaking the
risk that the value of its collateral will decline while it is barred from exercising its remedies.
Forbearance fees, like adequate protection payments, compensate the lender for this risk. Cf. In re
Pine Lake Vill. Apartment Co., 19 B.R. 819, 825 (Bankr. S.D.N.Y. 1982) (“[A] secured creditor
has the right to receive adequate protection for any decline in value the collateral may suffer after
the automatic stay is in effect, since but for the stay, the creditor could foreclose to prevent or
mitigate any loss in the value of the security.”).

Given the differences between liquidated damages provisions and forbearance agreements,
it is far from clear that a New York court would apply the liquidated damages standard to
forbearance fees. But even if that standard applied, it would not be satisfied here. The Debtor has
not shown that the amounts of the forbearance fees were unreasonable, and it follows that those
fees did not operate as unlawful penalties under New York law.
The Debtor’s remaining arguments to disallow the forbearance fees can be addressed very
briefly. The Debtor argues that New York’s usury laws treat forbearance fees as interest. That

appears to be correct, but it is not relevant because, as I’ve already discussed, New York’s usury
laws do not apply to loans in excess of $2.5 million to businesses. This loan, of course, was for
much more than $2.5 million. The Debtor argued, finally, that additional factual development is
needed on the reasonableness of the forbearance fees. However, the Debtor did not ask me to
adjourn the hearing to allow it to take discovery on that issue, nor did the Debtor request an
evidentiary hearing on the issue.
For these reasons, I will allow Romspen’s claim for forbearance fees that accrued between

July 21, 2023 and the petition date.
II. Romspen’s Postpetition Claim Amounts
The Debtor objects to two sorts of postpetition charges: default interest and late fees. I will
allow Romspen’s claim for postpetition default interest to the extent Romspen turns out to be
oversecured, and I will disallow Romspen’s claim for postpetition late fees.
A. Default interest
I addressed the legal standards governing postpetition default interest for oversecured
creditors at some length in a decision earlier this year, In re 33 Mako LLC, 2026 WL 922562

(Bankr. S.D.N.Y. 2026). I incorporate that legal discussion into this ruling and will only give a
short summary of the points most salient to the issue now before me.
Courts construing section 506(b) in the default interest context have “generally applied a
rebuttable presumption that an oversecured creditor is entitled to postpetition interest at the
contractual default rate.” Id. at *3. Courts look first at whether the Debtor is solvent or not. Id. And
if the Debtor is solvent, courts have treated the presumption in favor of the contract rate as “very
strong, perhaps unrebuttable or close to unrebuttable.” Id. If the Debtor is insolvent, the courts

strike postpetition contractual default interest if doing so is warranted by one or more specific
equitable considerations: (i) whether the contractual default rate is a penalty; (ii) whether there has
been misconduct by the secured creditor; (iii) whether awarding postpetition interest at the
contractual default rate would harm other creditors; and (iv) whether allowing such interest would
have an adverse effect on the Debtor’s fresh start. See id.
How this test applies in this case will depend on the Debtor’s financial position following
the consummation of the upcoming sale of the Debtor’s property. One possible outcome is that
Romspen may be undersecured, in which case it would not be entitled to any postpetition interest.

Another possibility, at the other end of the spectrum, is that Romspen is oversecured and the Debtor
is solvent. In that scenario, as I just mentioned, the presumption in favor of allowing interest at the
contractual default rate would be very strong, maybe unrebuttable. The Debtor has not identified
any possible basis to overcome that presumption.
The third possible scenario is that Romspen is oversecured but the Debtor is nonetheless
insolvent. I find that, if that is the eventual scenario, the Debtor has not made a sufficient showing
to overcome the presumption in favor of awarding interest at the contractual default rate.

The Debtor makes only one argument as to why default rate interest should be disallowed
in this third scenario. The debtor argues that the last of the four equitable factors—whether
allowing default interest would have an adverse effect on the Debtor’s fresh start—warrants
disallowance of default interest. If I disallow postpetition default interest, the Debtor contends, it
may be able to raise sufficient funds to pay off the full amount of Romspen’s claim. In that event,
Romspen has said that it would allow the Debtor to keep the property, rather than going through
with the scheduled sale. According to the Debtor, this would preserve its “fresh start.”

This argument fails for several reasons. First, there is no evidence that the Debtor would
actually be able to raise the money it needs to pay off Romspen’s claim even if I disallowed default
interest. According to Romspen, the Debtor has repeatedly said, both before and during the
bankruptcy, that it would soon be able to put together a refinancing to take out Romspen’s loan,
but these promises have never come to fruition. I have no way of knowing whether the Debtor’s
current expectation of a refinancing is accurate or just another hope on its part that again will not
come to fruition.

There is also a second, independent reason why I find this “fresh start” factor to be entitled
to little or no weight. Strictly speaking, the notion of a fresh start applies only to individuals, not
companies. Nevertheless, courts have sometimes given this factor weight in corporate chapter 11
cases, at least when the debtor had a real operating business, with employees and ongoing
commercial operations. See, e.g., In re 53 Stanhope LLC, 625 B.R. 573 (Bankr. S.D.N.Y. 2021). I
agree that, in cases of that sort, important bankruptcy interests may be served by allowing the
debtor to continue to operate its business. This case, however, is a single asset real estate case. The
Debtor has no operations beyond those required to maintain and lease out its one property, and it
has contracted out those limited operations to a property management company. The Debtor itself
has only one employee—Mr. Ebrahimzadeh, the Debtor’s principal. It is not clear that any
bankruptcy interest would be served by disallowing Romspen’s postpetition default interest in the

hope that this would enable Mr. Ebrahimzadeh to retain the Debtor’s business. Whether or not Mr.
Ebrahimzadeh keeps the Debtor’s property, the business will continue. The record provides no
indication that any jobs would be lost, or that the property’s tenants would suffer any adverse
effects, if ownership of the property were to change hands.
Moreover, the particular facts of this case reinforce the absence of a bankruptcy interest in
preserving Mr. Ebrahimzadeh’s ownership. As I ruled in my earlier decision in this case, Mr.
Ebrahimzadeh is not an ideal manager of the Debtor’s property. See 1300 Desert Willow, 677 B.R.

at 186. He had a poor track record before the bankruptcy, so poor that a receiver was appointed to
displace him. When the Debtor regained possession upon filing bankruptcy, Mr. Ebrahimzadeh
proceeded to do a poor job of managing the Debtor in this case. See id. In addition, during the
bankruptcy, Mr. Ebrahimzadeh was indicted by a federal grand jury in a Massachusetts district
court on six felony counts, including wire fraud and bank fraud. While I have no basis to know
whether he is likely to be convicted or acquitted, his indictment is likely to impair his ability to
manage the Debtor’s property effectively. Id.

For these reasons, I find that no basis exists to disallow default interest. To the extent
Romspen turns out to be oversecured, I will allow Romspen’s claim for postpetition interest at the
default rate.
B. Late fees
The next type of postpetition charges to which the Debtor objects is late fees. I will say at
the outset that it is not clear to me that any late fees actually accrued postpetition. As already

discussed, the note provides for two types of late fees. One is a fee equal to 5 percent of each
monthly interest payment that is late. That fee, I would assume, ceased to accrue after the loan was
accelerated, which happened before the bankruptcy. The other sort of late fee under the note was
a one-time fee, a fee of 0.5 percent of the total unpaid principal, which came due when Romspen
accelerated the loan. That fee accrued and was paid prepetition.
To the extent some late fees may have accrued postpetition, I am going to disallow them.
As previously discussed, postpetition late fees are subject to the general reasonableness standard

of section 506(b). Applying that standard, bankruptcy courts in this district have adopted an across-
the-board rule that late fees duplicate default interest and therefore are per se unreasonable if the
lender is being paid postpetition default interest. See In re 785 Partners LLC, 470 B.R. 126, 137
(Bankr. S.D.N.Y. 2012) (quoting In re Vest Assocs., 217 B.R. 696, 701 (Bankr. S.D.N.Y. 1998)).
In addition, I have already found that, under the specific facts of this case, the late fees duplicate
the default interest. For these reasons, I will disallow Romspen’s postpetition late fees.
III. Simple Versus Compound Interest

The Debtor argues that Romspen is entitled only to simple interest, not compound interest.
This issue is governed by the terms of the promissory note, as well as the loan agreement, which
is incorporated by reference into the note.
It is well settled under New York law that, when a contractual agreement is complete and
unambiguous, it should be enforced according to its terms. See South Rd. Assocs., LLC v. Int’l Bus.
Machs. Corp., 4 N.Y.3d 272, 277 (N.Y. 2005). Further, it is “important to read the document as a
whole to ensure that excessive emphasis is not placed upon particular words or phrases.” Id.
Whether a document is ambiguous or plain is a question of law. Id. at 278. A contract is ambiguous
if it is “capable of more than one meaning when viewed objectively by a reasonably intelligent
person who has examined the context of the entire integrated agreement.” Krumme v. WestPoint
Stevens Inc., 238 F.3d 133, 139 (2d Cir. 2000) (internal quotation marks and citation omitted).

Evidence extrinsic to a contract may be considered if the contract is ambiguous. See South
Rd. Assocs., 4 N.Y.3d at 278; State v. Home Indem. Co., 66 N.Y.2d 669, 671 (N.Y. 1985). Where
no party adduces extrinsic evidence, or where the extrinsic evidence provided does not resolve the
ambiguity, interpretation of the contract remains a question of law. See Hartford Acc. & Indem.
Co. v. Wesolowski, 33 N.Y.2d 169, 172 (N.Y. 1973) (“[I]f the equivocality must be resolved wholly
without reference to extrinsic evidence the issue is to be determined as a question of law for the
court.”); see also Home Indem., 66 N.Y.2d at 672 (where “no inferences [could] be drawn from

extrinsic evidence, the interpretation of the insurance policy [was] an issue of law.”).
A. Relevant provisions of the note and loan agreement
I find that the relevant provisions of the note and the loan agreement support the conclusion
that simple interest, not compound interest, is required.

Romspen’s argument that the note requires compound interest rests on the last four words
of the first sentence of section 1.2, which provides: “Interest at the Applicable Interest Rate on the
principal sum of this Note shall be calculated on the basis of a three hundred sixty (360) day year
and the actual number of days elapsed in such period, and shall be compounded monthly.”
Mestrezat Decl. (ECF No. 13), Ex. 4, § 1.2 (emphasis added). Romspen argues that the last four
words of this sentence, providing that interest “shall be compounded monthly,” are dispositive.
According to Romspen, nothing in the note contradicts these four words.
The Debtor contends, in response, that this sentence is ambiguous, because it provides that
interest is to be calculated and compounded “on the principal sum of this Note.” Mestrezat Decl.
(ECF No. 13), Ex. 4, § 1.2. It does not say that interest will be charged on unpaid interest.
According to the Debtor, it therefore does not provide for compound interest, which means interest
on interest.

I agree with the Debtor that this sentence is ambiguous. Compound interest, by definition,
is interest paid on both principal and unpaid interest. As the Second Circuit has stated,
“‘[c]ompound interest’ is interest paid on both principal and previously accumulated interest; at
the end of each interest period, the accrued interest is added to the principal for purposes of future
calculations of interest.” Themis Cap., LLC v. Dem. Rep. Congo, 626 F. App’x 346, 349 (2d Cir.
2015) (quoting 72 N.Y. Jur. 2d Interest and Usury § 2).

It could be argued that, when the parties provided in this sentence that interest would be
compounded monthly on “the principal sum of this Note,” they contemplated that any unpaid
interest would be added to principal on a monthly basis. This argument might be persuasive if this
sentence were viewed in isolation. However, other provisions of the note and the loan agreement
undercut this interpretation. For example, section 1.1(a) of the note says that “[i]nterest on the full
Loan amount” shall accrue at the annual rate of 11.25 percent. Mestrezat Decl. (ECF No. 13), Ex.
4, § 1.1(a). The word “Loan” is defined as “the advances made by [Romspen] to [the Debtor]
pursuant to [the loan] [a]greement.” Id., Ex. 1, Sched. I at 4. The term “advances,” by its common

understanding, means principal, not interest, since interest is not advanced; it merely accrues.
The provisions of the loan agreement, which are incorporated by reference in the note,
reinforce this conclusion. Specifically, the loan agreement defines the word “Debt” to mean “all
Indebtedness of [the Debtor] to [Romspen], including, without limitation, the outstanding principal
amount set forth in, and evidenced by, the Note, together with all interest accrued and unpaid
thereon and all other sums due to [Romspen] in respect of the Loan under the Note, this Agreement,
or any other Loan Document.” Id., Ex. 1, Sched. I at 2. Had the parties intended interest under the
note to be compound, rather than simple, they could have provided that interest shall be calculated
at the applicable interest rate on the Debt, with a capital D. Alternatively, they could have said

interest will be calculated on principal plus any unpaid interest. They didn’t say either of those
things.
I find that, taken together, these provisions indicate that the parties intended interest to
accrue at a simple rate, not a compound rate.
The Debtor points to one additional provision of the note, which it claims provides further

support for the conclusion that interest under the note accrues at a simple, not a compound, rate.
Specifically, the Debtor points to the last sentence of section 1.2, which states that “[t]he principle
of deemed reinvestment of interest does not apply to any interest calculation under this Note.” Id.,
Ex. 4, § 1.2. The Debtor notes that the concept of deemed reinvestment of interest is often equated
with compound interest and, on this ground, asks me to read this sentence to mean that the parties
intended interest to be simple, not compound.
Romspen does not dispute that deemed reinvestment of interest is often associated with

compound interest. However, Romspen contends that this concept can also have different
meanings, and it argues that I should give it a different meaning here. Moreover, I should do so as
a matter of Canadian law and practice, because Romspen—a Canadian-based lender—included
the reference to deemed reinvestment of interest in the note as part of the disclosures required of
Canadian lenders by the Interest Act of Canada. See Canada Act, 1982, c. I-15, reprinted in R.S.C.
1985, app II, no. 44 (Can.). To support its proposed interpretation of this provision, Romspen has
filed an appendix of Canadian legal sources, including a number of Canadian judicial decisions
and a lengthy article from the Alberta Law Review addressing the concept of deemed reinvestment
of interest under Canadian law.

If I had to rule on who has the better of this argument—that is, what effect to give to section
1.2’s statement that deemed reinvestment of interest does not apply to the calculation of interest—
I would be inclined to agree with the Debtor. This sentence, on its face, appears to support the
conclusion that simple, not compound, interest is required. However, I am reluctant to rule on this
issue, given Romspen’s contention that the issue is governed by Canadian law. Although Romspen
has filed an appendix of Canadian authorities on this issue, it has not offered any expert testimony
on Canadian law, nor has it asked for leave to present expert testimony. As a result, I don’t believe
I have a sufficient record to rule on the meaning of the last sentence of section 1.2 under Canadian
law.

Fortunately, I don’t have to rule on this issue, because Romspen doesn’t contend that the
note’s reference to deemed reinvestment of interest affirmatively cuts in its favor. It merely argues
that I shouldn’t give any weight to this sentence. I don’t need to give weight to this sentence,
because, as I just explained, the other provisions of the note establish that interest is computed at
a simple, not a compound, rate.

Let me mention, finally, an argument that the Debtor preemptively addressed in its claim
objection, assuming that Romspen would raise it. As it happened, Romspen did not make this
argument, but for the purpose of completeness, I will address it. The argument rests on section
5.13 of the note, which provides in pertinent part as follows:
In the event of a conflict between or among the terms, covenants,
conditions, or provisions of the Loan Documents, the term(s), covenant(s),
condition(s), and/or provision(s) that [Romspen] may elect to enforce from
time to time so as to enlarge the interest of [Romspen] in its security, afford
[Romspen] the maximum financial benefits or security for the debt, and/or
provide [Romspen] the maximum assurance of payment of the Debt in full
shall control.
Mestrezat Decl. (ECF No. 13), Ex. 4, § 5.13.
I find that section 5.13 does not apply to the compound interest issue. This section gives
Romspen certain rights when two or more provisions of the loan documents conflict. For example,
if section 1.2 unambiguously provided for compound interest but other sections provided for
simple interest, Romspen might have a plausible argument under section 5.13 that it could rely on
section 1.2 notwithstanding any contrary provisions in other sections of the note. However, as I’ve
already ruled, section 1.2 is itself ambiguous as to whether compound interest is required. As a
result, there’s no conflict here between two provisions that mean different things. Rather, there’s
an ambiguous provision whose meaning is clarified by reference to other provisions. For that
reason, section 5.13 does not apply.

B. Extrinsic evidence
At oral argument, when I asked the parties what evidence they wished to present beyond
the documents attached to their motion papers, the only potential topics counsel raised were the
reasonableness of attorneys’ fees and the accuracy of Romspen’s calculations. Neither party asked
me to consider any extrinsic evidence to aid in determining whether interest is simple or
compound.

Subsequently, in a letter it filed shortly before the April 27, 2026 hearing, Romspen asked
me to consider the second forbearance agreement as extrinsic evidence bearing on the compound
interest issue. As I’ve noted, Schedule 1 to that agreement detailed the outstanding indebtedness
that the Debtor then owed Romspen, including base interest, default interest, and a number of other
charges. It also provided that the parties to the agreement “hereby acknowledge and agree to the
accuracy of all Recitals” in the agreement. Mestrezat Decl. (ECF No. 13), Ex. 13, 2. The most
relevant recital was recital E, which provided: “As of July 21, 2023, the total amount of unpaid
principal, accrued interest at the Interest Rate and Default Rate, and late charges owing under the
loan is $22,913,432.49, as more particularly shown on the attached Schedule 1. The Unpaid Loan

Amount is due and payable.” Id. at 1.
According to Romspen, the interest amounts included in Schedule 1 to this agreement are
sufficiently large that they could only be the result of compounding. Romspen argued that I should
therefore treat this agreement as extrinsic evidence that the parties understood the note to require
compound, not simple, interest. In response, Debtor’s counsel disputed that the forbearance
agreement showed that his client understood interest under the note to be compound, rather than
simple. He argued that this forbearance agreement was presented to his client on a “take it or leave

it” basis, and his client believed it had to sign the agreement without changes as the price of
obtaining forbearance. According to Debtor’s counsel, his client did not, to his knowledge, review
the calculations and make any determination of whether they were accurate or whether they
reflected compound interest.
I find that the limited evidence on this issue is inconclusive. It is possible that the
forbearance agreement reflects the parties’ understanding that interest would be calculated on a
compound interest basis. But it is equally possible that the Debtor did not share that view but

nevertheless was willing to agree to pay the amounts shown on Schedule 1 in order to obtain
forbearance. Because neither Romspen nor the Debtor has provided any evidence on this issue
beyond the forbearance agreement itself, I have no basis to make a finding as to which of these
two possible scenarios occurred. I therefore find that the forbearance agreement does not shed any
light on whether the note provides for simple or compound interest.

CONCLUSION
For the foregoing reasons, I will enter an order granting the Debtor’s objection in part,
denying it in part, and deferring my ruling in part until a final determination can be made as to
whether Romspen is oversecured.

Dated: July 21, 2026
New York, New York
/s/ Philip Bentley
Honorable Philip Bently
United States Bankruptcy Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11409384. Public record. Not legal advice.