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May 10, 2023

Should Solvent Debtors Pay Post-Petition Interest at the Contract Rate? Recent Decisions Say "Yes"

By Shane G. Ramsey, John T. Baxter

American Bankruptcy Institute Journal

In an article published in May 2023 in the American Bankruptcy Institute Journal, Nelson Mullins attorneys Shane G. Ramsey and John T. Baxter shared their insight in to the question of, "should solvent debtors pay post-petition interest at the contract rate?", and how two recent decisions from the Fifth and Ninth Circuit Courts of Appeals have addressed the rare but ultimately important question. 

"The default rule in bankruptcy law is that interest ceases to accrue on a claim once a debtor has filed for bankruptcy. This rule is one of necessity; in most Chapter 11 cases, the debtor cannot pay all of its creditors, therefore payment of post-petition interest would diminish the value of the estate and result in disparate treatment of creditors," Baxter and Ramsey wrote. 

Read the full article here.