You may be wondering if bankruptcy can change the interest rates for ALL of your debts. If it can’t, then what are the debts have interest rates that may NOT be modified?
Today I wanted to talk about a few special debts that have interest rates that are protected by law and may not be changed in a bankruptcy.
Some debts have interest rates that are established by law and are not changed by bankruptcy.
- Child Support Arrears - carry a statutory interest rate of 6%.
- Property Taxes - carry a statutory interest rate of 12%.
- Property Tax Loans - The law upholds the contractual Interest Rate on Property Tax Loans, which frequently ranges from about 12% to about 18%.
In a chapter 13 Bankruptcy, these statutory interest rates are included in the regular monthly bankruptcy payment.
Interestingly enough, the interest on IRS tax debt that was incurred recently (also known as “Priority Tax Debt”) accrues but is not collectible during a chapter 13 bankruptcy. After the bankruptcy concludes, however, the interest that accrued during the bankruptcy for those priority taxes may come back for payment even though the underlying tax may have been paid out during the bankruptcy.
While statutory interest rates may not be changed in a bankruptcy, the debts that carry these statutory interest rates are generally so important that they may be paid from available resources before other, less important, debts like credit cards and medical bills. By giving priority to these important debts, they may become more affordable.