Did you know that judgment creditors can assess interest on unpaid amounts until debtors satisfy their debts in full? It’s true, at least in most states. But interest on judgments is of little solace when debtors make every effort to not pay. Interest generally doesn’t keep up with increased collection costs.
For the record, our main office is located in Salt Lake City, UT. Judgment law in Utah allows for interest against unpaid judgment balances. The interest rate in our state is the federal post-judgment rate plus an additional 2%. Note that the federal post-judgment rate changes every year.
The federal rate for 2023 is 4.73%. That means most Utah civil judgments issued on or after May 8, 2018 can be assessed a total interest rate of 6.73% during this calendar year. That is all well and good, but does it really matter when debtors don’t make the effort to pay?
Assessing additional interest on judgments can be a motivating factor for debtors. Those with at least a willingness to pay want to get the debt paid off as quickly as possible in order to minimize interest. Those types of debtors are our favorites. They are willing to work within their means to get things taken care of. But when debtors do not cooperate, you need to ask yourself how much collection efforts are costing you.
Let us just pick an arbitrary judgment value of $10,000. At a rate of 6.73% annually, your company could add $673 to the debtor’s total bill this year. That’s great, just as long as you are not spending that much on collection efforts. But if you are spending that much or more, you are still losing on the deal.
You also need to ask how long you think collection efforts are going to take. If you think you might be pursuing this case for the next several years, will the amount of interest you charge ever cover the total amount of time, resources, and money you put into collection?
There is no accurate way to calculate any of this. But you can check with your accountant to learn how much you have spent to date. If the amount is anywhere close to the total interest you have added to the debt, it might be time to rethink your strategy.
Collecting judgments from uncooperative debtors is often a time-consuming task. It also consumes financial resources. On the other hand, turning unpaid judgments over too Judgment Collectors mitigates the need for any further investment. If you accept our offer on your judgment, that’s it. We take over from there.
Your accounting team will not have to worry about the debt ever again. They can put their efforts into more productive tasks. Meanwhile, you are also not spending any more money on collection. We spend our money to do what we do.
Interest will continue to accrue, and our fee will have to be paid (provided we succeed with our collection efforts). But we have the skills, tools, and insider knowledge to get the job done. We have every motivation to get it done as quickly as possible.
The fact that states allow judgment creditors to assess interest is a good thing. Accruing interest is sometimes just the motivation debtors need to pay up. But when debtors don’t cooperate, charging interest doesn’t amount to much. That’s why it’s so important to have an experienced judgment collection agency on your side.
Published March 31, 2023