Will My Interest Rates Change if I File for Bankruptcy in Knoxville?

As a general rule, a bankruptcy filing will not change your interest rates, although in limited circumstances, the interest rate you pay a particular creditor can go down.

In a Chapter 7, you will either wipe out the debt to a creditor, or you can reaffirm that debt by signing paperwork that renews your obligations.  If your debt is unsecured (such as a credit card or a medical bill) we generally advise you not to reaffirm - the whole point of filing bankruptcy is to wipe out debt, so usually it does not make a lot of sense to reaffirm an unsecured debt. 

If you do want to keep an unsecured debt for some reason, you should be able to negotiate a lower interest rate since the creditor’s alternative is a zero payment.

In a Chapter 13, your Clark & Washington lawyer will put together a payment plan for submission to the Chapter 13 trustee and to the judge.  If you have secured debts, your plan will set out an interest rate that secured creditors are to be paid.

Usually this interest rate is the “contract” interest rate but not always.  Depending on the age and type of debt, your interest rate may come down.  It is difficult to generalize about interest rates so be sure to ask your Clark & Washington lawyer about how your bankruptcy filing affects the interest rates that you will pay for the debts affected by your bankruptcy.


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Clark and Washington Bankruptcy Attorneys, 2606 Greenway Dr., Suite 105-640, N. Building, Knoxville, TN 37918 - Call: 865-977-0121