Can bankruptcy control the interest rate I’m paying out to my creditors?

Yes.  If you make too much money to go bankrupt on your payday loans and bad auto loans, you can still control the interest rate you’re paying back in a chapter 13.  (Technically, you don’t make too much money to file bankruptcy;  you just make too much money to file a simple chapter 7 case).

If your income is too high to qualify for a chapter 7 bankruptcy, then you will most likely be filing a chapter 13 case.  You will be controlling your repayment of your creditors at 2% interest over 60 months, instead of the 29% interest credit cards or the 500% interest payday loans.  (Your car loans will be at about 5%, give or take half a point depending on the market).  interest rate

Today, I received a call from a potential client who wanted to file a chapter 7 on about $20,000 in payday loans and medical bills and a $20,000 car loan she was behind on.  However, when I reviewed her income, she was making about $30,000 above the median income for her household size, and even with her expenses/health insurance/taxes/etc., she did not qualify for a chapter 7.

As we spoke a little more, I realized that she could file a chapter 13.  In her bankruptcy, her car and creditors would be paid back at about $700 a month for 5 years.  Prior to this proposed bankruptcy, her car payment alone was $600 a month, not counting the horrendous payday loan payments every two weeks (interest only, not principal).

This was definitely not as good as a chapter 7, but it controlled her debt repayment, dropped the interest rate by 498%, and let her get her life back under control.