With the right collection attorney (i.e., a collection attorney that can actually collect), a money judgment can accumulate a sizable ‘return on one’s investment’. As of January 1, 1983, the rate of interest on a money judgment is 10% per annum. California Code of Civil Procedure §685.010(a). Perhaps surprisingly, that rate of return is generally better than one offered by a bank.
Similar to other types of investments, interest accrues from the day the judgment is entered (per California Code of Civil Procedure §685.020(a)). If the judgment is payable in installments (e.g., support judgments), interest accrues from the date each installment becomes due unless the judgment provides otherwise. California Code of Civil Procedure §685.020(b).
Keep in mind however, that post-judgment interest does not compound. Thus, interest is not paid on the accrued interest unless the judgment is renewed. When a judgment is renewed, whatever interest has accrued on the original judgment is Thumbnail image for 1452314260_Lawyer.pngadded to and becomes part of the principal amount of the judgment. See, Comment to California Code of Civil Procedure §683.110. Thereafter, interest accrues on the total amount of the renewed judgment, including the amount added as interest. In effect, the judgment creditor recovers “interest on interest” when the judgment is renewed. This is one of the many reasons for making sure that a judgment is timely renewed. A very competent and knowledgeable commercial collection and enforcement of judgment lawyer will advise his clients to renew the judgment after the first five years rather than wait until renewal at 10 years. The compounding of say a $100,000 judgment at 10% will increase the judgment to $150,000 on which 10% interest will continue to accrue, and by simple mathematics rather than having $100,000 in interest added to $100,000 of principal equals $200,000, the judgment creditor will have $225,000 at the statutory renewal time of 10 years. This makes a large difference for judgment creditors.
With regard to support orders, interest accrues only on overdue installments under the initial support order, whether it is a temporary or final order and whether or not it is contained in a judgment. An order fixing arrearages under the initial support order or establishing a periodic payment plan to liquidate arrearages under the initial order is not a new installment judgment for support that itself accrues interest. See, California Family Code §155.
When does interest cease to accrue? Well, the date interest ceases to accrue on a money judgment satisfied by levying writ of execution depends upon the manner in which the proceeds are collected:
(a) If the full amount due under the judgment is collected in a lump sum, interest ceases on the date of levy. California Code of Civil Procedure §685.030(a)(1).
(b) If the judgment is satisfied pursuant to an earnings withholding order, interest ceases (i) on the date the full amount required to satisfy the order is withheld from the judgment debtor’s earnings; or (ii) on the date a California Code of Civil Procedure §706.028 final order for costs and interest is issued. See, California Code of Civil Procedure §685.030(a)(2).
(c) In all other cases, interest ceases on the date the proceeds of sale or collection are actually received by the levying officer. California Code of Civil Procedure §685.030(a)(3).
Additionally, even though a minimal amount of interest; i.e., no more than $10.00, remains uncollected (due to automation of the continual \ daily interest accrual \ calculation), a money judgment is deemed wholly satisfied when the judgment amount specified in the writ is fully collected. California Code of Civil Procedure §685.030(e). In such event, court may enter writ in Register of Actions as “returned wholly satisfied”.
If a judgment is partially satisfied by levying a writ or otherwise, interest ceases to accrue as to the part satisfied on the date the part is satisfied. Tender of partial payment to the judgment creditor, or deposit in court, has the same effect as actual payment. California Code of Civil Procedure §685.030(c),(d). Partial payments must be applied first to the accrued interest on the judgment. Additionally, partial payments reduce the principal judgment only after all accrued interest is paid.
In levying a writ of execution, the levying officer must add interest at the daily interest rate shown on the writ from the date it was issued until interest ceases to accrue (above). In cases of partial satisfaction, the levying officer may, in conformity with his or her office policy, re-compute the amount of daily interest accruing on the money judgment. See, California Code of Civil Procedure §685.050(b)(2).
Finally, the 10% annual interest rate applies to sister-state judgments from and after the date they are entered as California judgments. California Code of Civil Procedure §1710.25(b). Interest accrued thereon prior to the date of such entry is computed at whatever interest rate is provided under the law of the state where the judgment was rendered. California Code of Civil Procedure §§1710.15, 1710.25.
In conclusion, at 10% per annum, a good collection attorney knows to file frequently and timely memorandums of costs to add in accrued interest when the Writ of Execution is issued and help the client get as much interest as possible.
To discuss your collection issue with an experienced collection attorney, contact Ronald P. Slates today.