Does interest owed to the Internal Revenue Service stop accruing during Chapter 13 bankruptcy?
The way that Chapter 13 bankruptcy works is that, instead of appointing another person as trustee of your estate and allowing them to sell off your unliquidated assets in an effort to settle any debt you owe, you are given the freedom to write out a payment plan over time that will settle all debt highlighted on the plan. The plan allows you to take out a specific amount of money from each paycheck you earn and pay it to the IRS as payment for your bankruptcy. You keep doing so until the debt is settled. In the instance of interest owed during a Chapter 13 bankruptcy, the interest will be frozen as of the date you filed for the bankruptcy. Interest may even be discharged, depending on the plan put in place. It is one of the few perks of undergoing a Chapter 13 bankruptcy as the interest will not grow after you file for bankruptcy.