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October 27, 2017

Partners Terri Gardner, Val Morrison Pen ‘Critical Issues Involving Claims for Post-Petition Interest and Attorney’s Fees’

Thomson Reuters, Norton Journal of Bankruptcy Law and Practice

By Terri L. Gardner, Valerie P. Morrison

Reprinted with permission from Thomson Reuters, Norton Journal of Bankruptcy Law and Practice, Vol. 26, No. 3 (copyright 2017) Issued in June 2017

Parties who loan money or extend credit to a business debtor often require a promissory note or other agreement that provides for repayment of the principal amount due, plus interest. Astute lenders also provide for a default rate of interest, late fees, and attorneys’ fees that are triggered upon the occurrence of certain defined defaults. Most states have laws that pertain to collection of attorneys’ fees in the event of default.

The Bankruptcy Code has specific sections that address the right to interest, late fees and attorneys’ fees. Bankruptcy Courts have inconsistently interpreted the Code sections in ways that impact fully secured, undersecured, and unsecured creditors. Some of the rulings are very interesting, surprising and contrary to what even experienced bankruptcy practitioners expect. This article will examine many of the issues which arise and key decisions that address them.