What is Post-Petition Interest?

When a debtor files for bankruptcy, the automatic stay — a type of injunction — prevents creditors and debt collectors from continuing to take collection actions or initiating new collection actions for debt. Yet the automatic stay will not freeze your debt or prevent interest from accruing on your debt during a bankruptcy case. If you are planning to file for a liquidation bankruptcy and to have all of your debts discharged, the matter of post-petition interest — meaning interest accrued on debt after you file your bankruptcy petition — is not likely to be a significant concern for you. However, on debts that are exceptions to discharge or in a reorganization bankruptcy case where creditors are entitled to post-petition interest, it will be very important for you to understand how post-petition interest will be handled in your case.

Understanding Post-Petition Interest

As we explained in brief above, post-petition interest, also known as “pendency interest,” is any interest that accrues on debts after you have filed your bankruptcy petition, thus the term post-petition interest. It can accrue on consumer debts as well as business debts. It is important to know if post-petition interest will be a factor in your bankruptcy case because it can affect the total amount that you will owe to creditors and the terms of your repayment plan.

We noted above that individuals filing for liquidation bankruptcies typically do not need to think about post-petition interest unless they have non-dischargeable debts. Yet in reorganization bankruptcies, post-petition interest is often relevant. At the same time, not all creditors are entitled to post-petition interest, so it is critical to discuss the specific facts of your case with a bankruptcy lawyer who can help you to plan ahead.

Which Creditors Get Post-Petition Interest?

Not all creditors are entitled to post-petition interest, as we explained above. What types of creditors are entitled to post-petition interest? Generally speaking, it will depend on the circumstances of the case and the jurisdiction in which you are filing for bankruptcy. Courts have generally said that solvent debtors in Chapter 11 cases must pay post-petition interest to unsecured creditors. Yet in a Chapter 13 case, even creditors with unsecured priority claims may not be entitled to post-petition interest unless the debtor is deemed to have “sufficient disposable income,” according to the IRS.

The best way to determine if your creditors are entitled to post-petition interest, and how to determine the amount and to work it into your repayment plan, is to discuss all details with a Florida bankruptcy lawyer who can help.

Contact Our West Palm Beach Bankruptcy Attorneys Today for Help with Your Business or Personal Bankruptcy Filing

If you have any questions or concerns about post-petition interest in your bankruptcy case, or any other questions or concerns about the bankruptcy process, you should seek legal advice. An experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan Delaney & Eller, PLLC can discuss your circumstances with you today, and we can help you to understand your rights and obligations when it comes to post-petition interest and other matters in a consumer or business bankruptcy filing. Contact our firm today to speak with an attorney about your bankruptcy plans.

Sources:

law.cornell.edu/uscode/text/11

irs.gov/irm/part20/irm_20-002-011#idm139664688467984