Post Judgment Interest: Are You Giving Money Away?

by Shawn P. McClure, Esq.

In a perfect world, a creditor would never have to file a lawsuit to collect on balances due and owing from debtors.  In a great world, any judgment obtained as a result of a lawsuit would immediately be paid by the judgment debtor.  In reality, creditors are often forced to sit on a judgment and hope that their judgment debtor either comes into some money or tries to sell a piece of real estate encumbered by their judgment lien.  This can take years. 

 

    Does this judgment simply sit interest free?  If not, then what interest rate is applicable to the judgment?  The answer to the first question is easy.  Under Pennsylvania law, at a minimum, interest will acrue on the judgment at the rate of six percent per annum.  As a creditor you have the ability to determine whether that rate is higher or lower when contracting with your future debtor at the beginning of your relationship.  

 

    Pennsylvania law provides that a plaintiff is entitled to interest on a judgment for a specific sum of money from the date of the verdict.  42 Pa.C.S.A. § 8101, (“Except as otherwise provided by another statute, a judgment for a specific sum of money shall bear interest at the lawful rate from the date of the verdict or award, or from the date of the judgment, if the judgment is not entered upon a verdict or award.”).  “Thus the general rule is that a plaintiff is entitled to interest on a judgment from the date of the verdict, and for purposes of computing interest, judgment and verdict are synonymous.” Osial v. Cook, 2002 PA Super 214, 803 A.2d 209, 215 (Pa. Super. 1994).

           

    A plaintiff receives statutory post-judgment interest as a matter of right where the damages are ascertainable by computation. Pittsburgh Constr. Co. v. Griffith, 2003 PA Super 374 (Pa. Super. 2003).

 

    Currently, the statutory rate of interest in the Commonwealth of Pennsylvania is fixed at six percent (6%) per annum, “but parties to a contract may agree to a higher rate.” Id; See, 41 P.S. § 202; In re Estate of Braun, 437 Pa. Super. 372, 650 A.2d 73, 78 (Pa. Super. 1994) (“the courts of this Commonwealth have found that the parties may agree to a post-judgment interest rate in excess of that provided by statute”); see, e.g., Miller v. City of Reading, 369 Pa. $71, 473-474, 87 A.2d 223, 226 (1952) (party who illegally fails to pay a debt is liable to pay interest thereon at the statutory rate unless the parties expressly agree otherwise); Smith v. Mitchell, 420 Pa. Super. at 144, 616 A.2d at 21 (Pa. Super. 1992) (quoting Daset Mining Corp. v. Industrial Fuels Corp., 326 Pa. Super. 14, 36, 473 A.2d 584, 595 (1984) and recognizing that in contracts concerning the payment of the sum of money at a rate higher or lower than the legal rate, they can agree to have the agreed upon interest rate continue after the debt becomes due; in the absence of an agreement, the interest rate fixed by law attaches); Cumberland Valley Cooperative Association v. Martin, 11 D.& C. 4th 10, 12 (C.C.P. Cumberland County 1991) (specific intent of the parties prevails over the statutory rate; parties’ agreement to pay post-judgment interest rate of 15% was upheld).

 

    Therefore, if the parties’ agreement is silent as to interest or refers to “legal” or “lawful” interest, the judgment creditor is limited to six percent (6%) per annum in post-judgment interest.  However, where the parties’ agreement expressly provides for a higher interest rate and the plaintiff has plead this higher rate, Pennsylvania law allows for the imposition of post-judgment interest at the higher, agreed upon rate.  Once again, another example of why it is better to plan for the worst and hope for the best when entering into a creditor/debtor relationship.   

Written by Bernstein- Burkley, P.C. on April 13, 2010

12 Responses to Post Judgment Interest: Are You Giving Money Away?

  1. Shawn: Isn’t it surprising (and disappointing) how many credit sellers don’t make sure they are entitled to the highest possible interest rate and to collection expenses or attorney’s fees? They are so simple to fold into the contract. Thanks for the article.

  2. Can the 6% interest be added to District Justice level judgments as well? I have been hunting for a law on this but havent been able to find one.

    • The easy solution is to immediately index the district magistrate judgment with your local court of common pleas after the thirty (30) day appeal period runs. That would eliminate any perceived distinction between a district magistrate judgment and a judgment entered in the court of common pleas. That being said, I am unaware of another statue that would impact district magistrate judgments. The statute uses the word judgment, so I believe interest accrues on the magistrate judgment.

    • Hi Rick, this interest would be applied as simple interest on a judgement not paid for five years. Please let us know if you have any other questions. Thanks!

  3. Rick, is any special language required on a invoice or contract distinguishing pre or post judgment intrest

    • Jeffrey,

      According to Shawn McClure: “No specific language. Language regarding contractual interest rate need only be clear and unambiguous, so that the intentions of the parties are clear to the court at a later date. The agreement to pay interest, pre or post judgment, should be in a writing signed by the parties.” Hope that helps. Please let us know if you have any other questions!

  4. If interest is not listed or mentioned in a district magistrate judgment and only a specific payment amount per month is listed, does the debtor still have to pay interest?

  5. Does a plaintiff have an infinite amount of time to collect post-judgment interest, or is there some sort of limit?

    • Hi Kevin, according to Shawn McClure: Interest will accrue as long as the judgment is valid, which in PA is twenty (20) years.

  6. A resulting judgment and lien now filed at the Carbon County Court House seems to do me (the plaintiff) no good. The process of a Writ of Execution for a sheriff sale was avoided because the debtor skipped the county and possibly State. He may even be traveling outside our domestic borders despite his social security status and failure to file state or federal taxes for many years.
    Needless to say, what bothers me most is his ability to flip cars around like kids do food at lunch. I thought a lien would hinder his ability to move around motor vehicle titles for profit and Getting insurance.

  7. After a judgment & lien does BMV or any credit bureau get notified by the court house?
    Is it safe to assume the 5 year renewal on the judgment attaches to the lien as well?

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