If you’re a business professional, chances are you’ve heard the term “postjudgment interest.” But do you know what it actually means?
The short answer is that postjudgment interest is the accrued interest on a debt that accrues after a court renders a judgment admitting or dismissing a claim. In essence, it can be thought of as an extension or clarification of damages awarded to the plaintiff.
When Is Postjudgment Interest Due?
Generally speaking, postjudgment interest is due when the court orders the defendant to pay the plaintiff a certain amount of money or award damages. In this case, postjudgment interest serves as an incentive for the defendant to pay as quickly as possible and helps to ensure that the plaintiff is financially compensated for the costs of litigating the case.
Postjudgment interest generally varies from state to state but is generally designed to compensate the plaintiff for any delay in payment of its damages or award. In some states, for example, postjudgment interest is capped at a certain amount, and in others, it is set at a certain percentage rate each year. In still other states, postjudgment interest may be determined by the court, after considering the circumstances of the case.
Real-World Examples
To illustrate the concept of postjudgment interest, consider the following real-world examples:
Example 1: A court orders the defendant to pay the plaintiff $100,000 in damages plus postjudgment interest. In this case, the postjudgment interest would begin to accrue from the day the judgment was granted until the day the debt is paid in full.
Example 2: In some states, the court may set the postjudgment interest rate. Suppose the court set the postjudgment interest rate at 3%, and the plaintiff was awarded $100,000. In this case, the postjudgment interest rate would continue to accrue at 3% per year until the debt was paid in full.
The Bottom Line
Postjudgment interest provides an incentive for the defendant to make a timely payment to the plaintiff and it is designed to compensate the plaintiff for any delay in payment of damages or award. The amount and rate of postjudgment interest may vary from state to state, but the court will typically determine the postjudgment interest based on the facts of the case.