The concept of prejudgment interest is an integral part of our legal system. In simple terms, it is the interest you can charge on an overdue debt from the time you file the lawsuit until the time the debt is paid. If your business has been affected by a money-related lawsuit, then you may need to understand the impact of this specific interest rate and what it means for the success of your business.
Understanding How Prejudgment Interest Works
The way that pre-judgment interest works is that a plaintiff in a court case will be able to charge the defendant for the interest that accumulates between the time the lawsuit is filed and the time the dispute is resolved. Depending on the state, this interest rate can vary – and in some cases can be quite hefty. This interest rate is set by the state when the suit is filed, so it isn’t something you can negotiate or haggle over. Once the judgment has been determined by the court, the amount of money owed and the associated interest will be calculated accordingly.
The Impact on Businesses
When it comes to businesses, the impact of pre-judgment interest can have a sizable effect. Businesses may end up being on the receiving end of a large judgment if they have been found liable for money damages due to an issue like a breach of contract. In this situation, they could be charged the prejudgment interest compounded from the lawsuit being filed until the time the judgment is paid. In a case like this, the interest can add up quickly, and depending on the interest rate, could add a significant amount of money to the overall sum owed.
Tips for Managing Prejudgment Interest
It’s important to keep an eye on this interest rate and manage your money as judiciously as possible. With that in mind, here are a few tips to stay ahead of the game when it comes to handling pre-judgment interest:
- Plan ahead. Make sure you have a plan in place for how you can pay the judgment if it is awarded. This can help you avoid any further issues with interest.
- Seek legal counsel. Having a qualified attorney on your side can give you advice and guidance as you navigate through a lawsuit.
- Be prepared. Understand the process and understand the possible outcomes so that you can be in the best position possible.
Conclusion
Prejudgment interest can have a significant impact on businesses involved in civil litigation. Understanding what it is, how it works, and how to manage it can help you stay on top of court proceedings and make sure that your business is in the best possible financial position.