Moving Forward From Judgment Day: Post Judgment Interest
Corporate & Business Law on March 28, 2012
Whether your business has obtained a judgment in its favor or a judgment has been entered against it, business owners should be aware that interest begins to accrue on the judgment amount from the date of entry of the judgment. That interest continues to accrue until the judgment amount, plus all accrued interest is paid to the judgment creditor. Post judgment interest is imposed to encourage judgment debtors to pay judgments quickly.
In order to determine the rate of interest on a judgment, a business owner should look first to the judgment itself. Prior to July 1, 2011, the judgment designated a rate of post judgment interest on the face of the judgment. That judgment rate was set annually by the Chief Financial Officer of the State of Florida. However, recent changes to the relevant Florida Statutes on judgments have altered the way interest accrues on a judgment.
On December 1, March 1, June 1, and September 1 of each year, the Chief Financial Officer of the State of Florida sets the interest rate for the following quarter. From July 1, 2011, when the statute was revised, through the first quarter of 2012, the applicable rate has been 4.75%. The rate of interest is determined for the remainder of the calendar year by the rate in place as of the date of entry of the judgment. The interest rate is adjusted on January 1 of each year in accordance with the interest rate in effect on that date as set by the Chief Financial Officer until the judgment is paid.
To break it down with an example, it’s easier to understand with actual dates. If your business has a judgment entered against it on August 1, 2011, the interest rate would be 4.75% from August 1, 2011 through December 31, 2011. Then, since the rate for the calendar year 2012 has remained the same as of January 1, 2012 (at 4.75%) for all of 2012, there is no change to the rate. The next time the interest rate could possibly fluctuate is on January 1, 2013.
If your business has an outstanding judgment against it or has obtained a judgment against a debtor, pay attention to the current interest rates set by the Chief Financial Officer of the State of Florida so that you can make an educated decision regarding judgment payoffs. Remember that if debtors and creditors negotiate a payment plan, a great place to begin the negotiations is in the amount of post judgment interest. Debtors: your creditor wants to start receiving money sooner rather than later. Creditors: your debtors may be looking to save funds on paying reduced post judgment interest.