How is Interest Added to the Unpaid Judgment Debt?
Ten percent (10%) interest per year can be added to the judgment amount from the day it is entered in court until it is paid in full. If partial payments are made, those payments are first applied to the accrued interest and then to the unpaid principal. (See California Code of Civil Procedure, Sections 685.010 to 685.030)
To calculate 10% interest on the judgment debt owed
1. Figure out the amount of interest that can be charged a day.
Formula: Judgment amount owed x .10 = interest per year
Interest per year ÷ 365 (days) = amount of daily interest
Or, said another way:
Take the amount of judgment owed
Multiply it by 10% (or 0.10)
Divide that number by 365 days (1 year)
The result is the amount of interest that can be charged a day.
Example: Let’s say the judgment debtor owes the judgment creditor $5,000.00 (called ‘the principal’) on the judgment.
$5,000.00 x 0.10 = $500.00
$500.00 ÷ 365 = $1.37 a day
The interest will be $1.37 a day as long as the unpaid amount remains $5,000.00.
2. Figure out the amount of interest owed on the day the judgment debtor pays the debt.
Formula for a lump-sum payment:
Multiply the number of days that have passed since the day the court entered the final judgment to the day of payment x amount of daily interest = amount of interest owed on day of payment.
Or, said another way:
Figure out the number of days that have passed since the court entered the final judgment up to the day of payment.
Multiply the days by the amount of daily interest you figured out.
The result is the amount of interest owing on the day of payment.
Example: In the above example, if the judgment debtor owes the judgment creditor $5,000.00:
The interest owed is $1.37 a day
If 72 days have passed since the final judgment, then
$1.37 per day X 72 days = $98.64
The judgment debtor owes $98.64 in interest on the principal of $5,000.00.
3. Add the amount of interest due on the day the judgment debtor pays the judgment debt to the original judgment debt owed.
Example: Let’s say the judgment debtor is ready to pay $5,000.00 to the judgment creditor 72 days after the final judgment.
$98.64 interest + $5,000.00 debt = $5,098.64.
The judgment debtor owes a total of $5,098.64 on the 72nd day after the court entered the judgment.
To calculate 10% interest on installment payments
Often a judgment debtor will pay all of the money they owe, but not all at the same time. In this case, the installment payments the debtor made are applied to the interest first and then to the judgment debt (the principal) owed.
Example: After 145 days, the judgment debtor pays $400.00 on the judgment debt of $5,000.00.
1: Figure out the amount of interest that can be charged.
After 145 days, $198.65 in interest (145 days x $1.37 per day) will have accumulated on the $5,000.00 judgment.
2: Subtract the interest owed from the debtor’s payment.
The $198.65 interest is paid first. That leaves a $201.35 payment toward the $5,000.00 debt. ($400 - $198.65 = $201.35).
3: Subtract the remainder of the debtor’s payment from the total debt owed.
Now credit the remaining $201.35 against the $5,000.00 judgment ($5,000.00 - $201.35 = $4,798.65 of unpaid judgment).
The judgment debtor now owes $4,798.65 on the judgment.
4: Figure out the new amount of interest that can be charged.
The new daily interest will then accumulate at a rate of $1.31/day ($4,798.65 x 10% = $479.86 ÷ 365).
Assume then, that 215 days later, a $1,700.00 payment is made.
During the 215 days, $281.65 (215 days x $1.31/day) of interest will have accumulated.
Out of the $1,700.00 received, pay the accumulated interest first ($1,700.00 - $281.65 = $1,418.35) leaving $1,418.35 to apply to unpaid judgment principal.
Now credit the $1,418.35 against the remaining judgment principal of $4,798.65, and we find that $3,380.30 remains unpaid.
The new daily interest will then accumulate at a rate of $0.93/day ($3,380.30 x 10% = $338.03 ÷ 365).
Repeat these calculations until you are completely paid.
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