I had an “in-person” court appearance yesterday morning, renewing and extending a judgment from 2011. As a creditor, old judgments can be a gold-mine, as home values have soared in Middle Tennessee, and a well placed judgment lien might have some equity.
Plus, it’s sort of nice to take a trip down memory lane, back to when creditors automatically got 10% interest on their judgments.
Yesterday, in my proposed Order Renewing Judgment that I handed up to the Judge, I included language that the renewed judgment would accrue interest “as provided in the original judgment, at the then applicable rate of interest under state law.”
The Judge asked me if that meant that interest was 10% over all of this time (and into the future) or, instead, was it a variable rate, changing each time the rate changes.
Well, Judge, that’s a legal question that drives hundreds of visitors to my creditor rights law blog every year.
The Judge asked me if I had a case or other authority to show whether or not the rate fluctuates. I hadn’t researched it (because it wasn’t really an issue on this unopposed Motion), so the Judge simply crossed out “then existing rate” and wrote in “applicable rate,” which punted the issue down the road.
But, we sort of have an answer, thanks to a local lawyer’s comment on this blog post from early last year:
From the TNCourts.gov website: “Beginning July 1, 2012, any judgment entered will have the interest set at two percent below the formula rate published by the Tennessee Department of Financial Institutions as set in Public Chapter 1043. The rate does not fluctuate and remains in effect when judgment is entered.”
And, no, that’s not a case or a statutory cite. It’s just an introductory paragraph on the Administrative Office of the Courts website. But, it’s something. And, it’s as good as we’ve got for right now. “The rate does not fluctuate and remains in effect when judgment is entered.”
As a practical matter, the best practice would be to always use a specific interest rate in any judgments. Instead of saying post-judgment interest “as provided under Tennessee law” or at the “applicable post-judgment interest rate,” always just say the a specific rate, whether it’s 5.25% or 7.45%. This text would create a presumption of a specific, certain rate of interest going forward.
As more of these Great Recession era judgments come up for renewal and lenders are dusting off these pre-2013 judgments for execution against houses and defendants with drastically changed circumstances, I’m betting that, very soon, this is going to be an issue that a creditor is going to need briefed.