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.