New York State Pre- and Post-Judgment Interest Rates

What Is a Judgment?

A judgment is a court order in a civil or criminal case that represents a decision in a lawsuit. If a court enters a judgment in favor of a creditor suing you to recover a debt, it usually means the court is ordering you to pay back the debt plus other amounts. This additional money can include court costs, attorney fees, and interest. This type of judgment is also called a money judgment.

This article focuses on the interest component of a money judgment under New York law. This includes the two major types of interest — pre-judgment interest and post-judgment interest — and how they’re calculated. We’ll also discuss why courts often order judgment debtors to pay interest.

How Does Judgment Interest Work in New York?

Two types of interest can accrue on New York court judgments: pre-judgment interest and post-judgment interest.

• Pre-judgment interest applies to the debt before the court judgment. It’s calculated based on the time period from when the claim arose (the event that caused the debt like a breach of contract or unpaid rent) to when the court enters the judgment. The purpose of pre-judgment interest is to compensate the plaintiff (the creditor) for the time they were deprived of the use of their money.

• Post-judgment interest applies to the monetary judgment amount after the court judgment. It starts accruing on the date the judgment is entered and continues until the judgment is paid in full. This type of interest ensures that the plaintiff is compensated for any delays in payment after the court’s decision.

Even though they apply at different stages, both pre-judgment and post-judgment interest are meant to compensate the plaintiff for not having access to their money while the case was unresolved or the judgment remained unpaid.

Simple vs. Compound Interest Rates

Pre-judgment interest and post-judgment interest are both awarded at the court’s discretion. A judge may also decide whether the interest awarded will be simple or compounding:

• Simple interest applies strictly to the amount of the money judgment. 

• Compounding interest applies to the amount of the judgment plus any prior interest.

Why Is Pre-Judgment Interest Used?

Pre-judgment interest has two functions:

• To compensate the person who is owed money (the plaintiff) for not being able to use that money while the case was going on.

• To prevent the person who owes the money (the defendant) from benefiting financially by keeping money that wasn’t theirs to begin with.

This second reason for awarding pre-judgment interest is more about principle, especially in consumer debt lawsuits. In these cases, typically the consumer doesn’t have the money to pay off the debt; they aren’t simply refusing to pay. Even so, courts want to make sure defendants don’t gain any financial advantage from holding on to money they shouldn’t have.

Why Is Post-Judgment Interest Used?

Post-judgment interest is meant to protect the winning side when they aren’t paid right away. It compensates plaintiffs for the time between when the court enters the judgment and when the defendant actually pays what they owe.

Ideally, once the court rules in favor of the plaintiff, the defendant would immediately pay the money owed. However, that rarely happens. There’s often a delay — sometimes lasting months or even years — especially if there are settlement discussions after the judgment or if the defendant appeals the case.

What Are the New York State Pre- and Post-Judgment Rates?

In New York, the interest rate for pre- and post-judgment amounts depends on the type of case. For consumer debt cases, the interest rate is 2% annually. This rate applies whether the interest is being calculated before or after a court judgment.

For other types of cases, such as personal injury lawsuits, the post-judgment interest rate is much higher — 2% per month, which works out to 24% annually.

These rates are designed to ensure that plaintiffs are fairly compensated for delays in payment, whether the delay happens before or after a court judgment is entered.

What Is the Federal Post-Judgment Interest Rate?

Federal law permits judges to order interest on most judgments entered in federal district courts. This federal post-interest judgment interest is similar to the judgment interest in the state of New York. Interest begins to accrue from the date of judgment and continues accruing until the judgment is paid off. But when it comes to calculating the exact interest rate, federal law is a bit more complicated.

How Federal Rates Are Calculated

New York state law clearly states its statutory interest rate. Federal law is different because the federal post-judgment interest rate changes every week. It’s calculated by looking at the weekly average interest rate of a one-year treasury bill (sometimes called a “T-bill”) for the week immediately preceding the date of the entry of judgment. The interest rate for the one-year treasury bill is published by the Board of Governors of the Federal Reserve System every Monday and can be found on the Federal Reserve website. 

If this interest rate computation sounds a bit too complicated, don’t worry. You can get a simple answer to what post-judgment interest rate applies to your case by visiting the Post-Judgment Rates page from the U.S. Bankruptcy Court for the Southern District of California. On that page, you can find an interest calculator that tells you what the post-judgment interest rate is for judgments entered during the current calendar week. This applies to everyone, not just Californians. 

Let’s Summarize…

When a judge rules on a consumer debt lawsuit, the court enters a judgment for the winning side. If the plaintiff wins, the defendant becomes responsible for paying the debt. In addition to the unpaid debt, the defendant may also be required to pay pre-judgment and/or post-judgment interest.

Pre-judgment interest compensates the plaintiff for not having access to their money before the judgment is entered. It also accounts for any financial benefit the defendant may have gained by holding on to money they owed. Post-judgment interest compensates the plaintiff for delays in payment after the judgment is entered and until the debt is fully paid.

In New York state, the interest rate for pre- and post-judgment interest on consumer debt cases is 2% annually. In federal court, the post-judgment interest rate is determined by the weekly average interest rate of a one-year treasury bill.