Does a Judgement Accrue Interest Annually?

Even if you win a judgment against someone who owes you money, your debtor may not pay up immediately. You may also have to incur additional costs to collect the money you're due. To compensate for the loss of use of your money from the date you win your judgment until it's all paid, states allow you to add "post-judgment interest" to the unpaid amount. States vary on how much interest you can expect to add and how you calculate interest. Contact your court clerk or a legal aid organization to get help on establishing interest.

Examples of State Laws

State law governs how much interest you can expect to receive on unpaid judgments. In addition, your interest rate can be fixed or fluctuate according to some variable. For example, in California, it's 10 percent fixed annually, and it's 9 percent in New York. North Carolina allows 8 percent; Georgia, Kentucky and Massachusetts allow 12 percent. In Iowa, post-judgment interest is tied to U.S. Treasury bills. In other words, the rate is variable, set at 2 percent plus the average auction price of 52-week T-bills. The National Center for State Courts has compiled a list of interest rates, but you should check with your court for the most up-to-date information.

Contracts

If you signed a contract before the debtor defaulted, and your contract set an interest rate, that rate may prevail after you win your judgment. This is a common scenario when credit card companies win judgments. It's also a word to the wise to people who personally lend money with promissory notes. Check the post-judgment rates in your state to consider whether you want to add a clause on interest.

Timing

States also differ on the date when the interest clock begins. Generally, if you had a contract prior to judgment, interest charges could begin as soon as your debtor defaults or the first time you contact the debtor about a late payment. In other states, the judgment starts when the judge bangs the gavel. In a few, it starts when the clerk officially enters the judgment into court records. Check with your court to find out how your state operates.

Federal Judgments

If you win a judgment in a federal government, you are also generally entitled to post-judgment interest. According to the Administrative Office of the U.S. Courts, interest begins on the date of judgment and accrues until fully paid. The interest rate is based on the weekly average one-year constant maturity -- nominal -- Treasury yield, as published by the Federal Reserve System. The current rate is published by the Federal Reserve each Monday for the preceding week.