diff --git a/server/util.go b/server/util.go
index 8407f9b492..b95f8ad505 100644
--- a/server/util.go
+++ b/server/util.go
@@ -146,7 +146,8 @@ func interceptConfigs(rootViper *viper.Viper) (*tmcfg.Config, error) {
 
 	conf := tmcfg.DefaultConfig()
 
-	if _, err := os.Stat(configFile); os.IsNotExist(err) {
+	switch _, err := os.Stat(configFile); {
+	case os.IsNotExist(err):
 		tmcfg.EnsureRoot(rootDir)
 
 		if err = conf.ValidateBasic(); err != nil {
@@ -158,7 +159,11 @@ func interceptConfigs(rootViper *viper.Viper) (*tmcfg.Config, error) {
 		conf.P2P.SendRate = 5120000
 		conf.Consensus.TimeoutCommit = 5 * time.Second
 		tmcfg.WriteConfigFile(configFile, conf)
-	} else {
+
+	case err != nil:
+		return nil, err
+
+	default:
 		rootViper.SetConfigType("toml")
 		rootViper.SetConfigName("config")
 		rootViper.AddConfigPath(configPath)
diff --git a/server/util_test.go b/server/util_test.go
index 7cc10b3542..582fb4c089 100644
--- a/server/util_test.go
+++ b/server/util_test.go
@@ -6,6 +6,7 @@ import (
 	"fmt"
 	"os"
 	"path"
+	"path/filepath"
 	"strings"
 	"testing"
 
@@ -444,3 +445,26 @@ func TestInterceptConfigsPreRunHandlerPrecedenceConfigDefault(t *testing.T) {
 		t.Error("RPCListenAddress is not using default")
 	}
 }
+
+// Ensure that if interceptConfigs encounters any error other than non-existen errors
+// that we correctly return the offending error, for example a permission error.
+// See https://github.com/cosmos/cosmos-sdk/issues/7578
+func TestInterceptConfigsWithBadPermissions(t *testing.T) {
+	tempDir := t.TempDir()
+	subDir := filepath.Join(tempDir, "nonPerms")
+	if err := os.Mkdir(subDir, 0600); err != nil {
+		t.Fatalf("Failed to create sub directory: %v", err)
+	}
+	cmd := StartCmd(nil, "/foobar")
+	if err := cmd.Flags().Set(flags.FlagHome, subDir); err != nil {
+		t.Fatalf("Could not set home flag [%T] %v", err, err)
+	}
+
+	cmd.PreRunE = preRunETestImpl
+
+	serverCtx := &Context{}
+	ctx := context.WithValue(context.Background(), ServerContextKey, serverCtx)
+	if err := cmd.ExecuteContext(ctx); !os.IsPermission(err) {
+		t.Fatalf("Failed to catch permissions error, got: [%T] %v", err, err)
+	}
+}