If you have fallen behind on your debts, creditors will likely add penalties, late fees, and interest to your bill. The additional late fees and interest charges can substantially increase the balance of your debt. These fees often make it nearly impossible for borrowers to keep up with. Fortunately, Chapter 7 & Chapter 13 bankruptcy may be an option to eliminate late fees and interest. Bankruptcy law limits the amount of interest, late fees, penalties, and attorney costs a creditor can charge. Whether you can eliminate late fees and interest in bankruptcy will depend on the type of debt and bankruptcy chapter. Therefore, you should contact a Tampa bankruptcy law firm for advice regarding any specific case or type of debt.
Eliminate Late Fees and Interest on Secured Loans in Bankruptcy
Secured debts are loans that have collateral, such as a car loans and mortgages. On the other hand, debts without collateral, such as credit cards and student loans are unsecured claims. Further, there are even distinctions amongst secured claims. If the collateral is worth less than the amount of the debt, the creditor’s claim will be deemed undersecured. Conversely, if the collateral is worth more than the amount of the debt, the creditor’s claim is oversecured.
These distinctions are very important in bankruptcy because oversecured creditors may be entitled to interest, fees, costs, and charges allowed under the loan agreement. If the debt is undersecured or unsecured you may be able to eliminate late fees and interest with Chapter 7 or Chapter 13 bankruptcy. See Bankruptcy Law 11 USC 506. A creditor’s secured claim will be limited to the value of the collateral, amounts over and above the value of the collateral are deemed unsecured claims. Therefore, you may also be able to eliminate late fees and interest on secured claims. For information on how to eliminate late fees and interest in a particular case contact a Tampa bankruptcy law firm.
Eliminate Interest Charges in Bankruptcy
Creditors with secured claims may be allowed to charge interest that has accrued after the date the debtor files for bankruptcy. However, the amount of interest that may be added to the balance will depend on the terms of the loan agreement and the value of the collateral. Interest that accrues after the date the debtor files bankruptcy and exceeds the value of the collateral will be treated as an unsecured claim. Thus, you may be able to eliminate late fees and interest on secured claims.
Eliminate Late Fees & Interest in Bankruptcy
In the event that the value of the collateral exceeds the loan, the creditor may be entitled to add late fees and interest in bankruptcy. However, the late fees and interest added to the bankruptcy claim must be permitted in the underlying loan agreement.
Additionally, late fees and interest must not be viewed as a penalty. Penalties in contracts are punitive damages and frowned upon by courts. See bankruptcy case In Re Leatherland Corp. If the fee, charge, or cost is deemed to be a penalty you may be able to eliminate the late fee and interest in bankruptcy. If the late fee and interest is permitted, it will only be a secured claim to the extent of the value of the collateral. Any amount in excess of the value of the collateral will be treated as an unsecured claim. In Chapter 7 or 13, you may be able to eliminate the late fees and interest treated as unsecured.
Tampa Bankruptcy Law Firm
If you are having a difficult time meeting your financial obligations Florida Law Advisers, P.A. may be able to help. We are an experienced Tampa bankruptcy law firm committed to providing personalized attention and dedicated legal counsel. All of our initial consultations are free and convenient payment plans are available at no additional cost. To speak with a bankruptcy lawyer in Tampa and schedule a free consultation call us today at 800 990 7763.