Winning a monetary judgment against a debtor could mean collecting not only the original amount owed, but also additional amounts covering everything from court costs to post-judgment interest. But states regulate monetary judgments differently. Therefore, post-judgment interest is not a given. Creditors unsure of whether or not post-judgment interest applies should consult with their attorneys.
More About Post-Judgment Interest
Post-judgment interest is a rate of interest applied to the outstanding balance on a given judgment. It is actually quite similar to credit card interest. Every year, interest is calculated against a judgment’s outstanding balance. That balance is not limited only to the original amount owed. It is cumulative, meaning it includes the original amount plus additional fees and previously assessed interest.
Judgment Collectors, out of Salt Lake City, UT, says the Beehive State’s interest rate on outstanding judgments is two percentage points higher than the current federal interest rate. The federal rate as of January 1, 2023 stood at 4.73%. Therefore, the interest rate applied to Utah judgments this year is 6.73%.
There are exceptions to this rule. Furthermore, other states may determine post-judgment interest rates differently. This is simply how Utah does it. Judgment creditors are subject to whatever interest rates their respective states impose.
Interest Rates by Contract
It is possible for the two parties in civil litigation to enter into some sort of contract stipulating each one’s responsibilities following the conclusion of legal proceedings. Such stipulations could include post-judgment interest. For example, the two parties might agree on an annual interest rate of 2%. It would be binding as long as the contract remains in force.
Contracts of this nature supersede state imposed post-judgment interest. So, in Utah, an interest rate of 2% stipulated in a post-judgment contract would supersede the states 6.73% interest rate.
Asking the Court for Interest
Another thing to consider is that interest is not automatically assessed in every state. In many states, Utah being one of them, post-judgment interest isn’t automatically assessed unless there is a contract in place. The absence of said contract would force the judgment creditor to go back to court for a post-judgment interest order.
Getting such an order is usually little more than a formality. But without it, a creditor cannot charge interest. It should also be noted that most states do not allow interest rate adjustments year after year. Whatever rate is assessed immediately following the judgment is maintained until the debt is paid off.
Interest Accrues Year-on-Year
Earlier you read that post-judgment interest is a lot like credit card interest. The many similarities between the two include the fact that interest is assessed annually. That means it accrues year-on-year. Interest for the coming year is determined by the total amount due at the end of the current year.
Let us say a debtor started the year with a $10,000 balance. Monthly installment payments reduce that balance to $8,000 by the end of October. But then the parties need to go back to court for some reason, resulting in a $2,000 legal bill for the creditor. That bill gets passed on to the debtor which boosts the outstanding balance back up to the original $10,000. Interest is assessed on the entire balance, not the lesser amount from before the legal bill was added.
Nearly all of the states allow judgment creditors to assess interest against debtors on an annual basis. But post-judgment interest is not always a given. There are certain circumstances under which interest isn’t charged. It is up to judgment creditors to figure out their options before deciding how to proceed.
