When obligors default on their credit obligations, creditors will usually attempt to use work-out options before going to court. However, it is sometimes necessary to go through the courts and obtain a judgment to recover money lent to or guaranteed by an obligor.

At its most basic level, a judgment is the court’s legal acknowledgment of the existence of the debt. That is, the court has recognized that the obligor owes the debt and does not have any legal defenses to it.

The next step is to collect upon that judgment. In doing so, it may be necessary to, among other things, seize assets, sell collateral, require the debtor to complete financial disclosure statements, and garnish wages and accounts. Not surprisingly, these efforts take time and effort. During that time, the judgment collects interest at the rate established by state statutes.

To get the most from a judgment, it is important to understand and consider statutory post‑judgment interest, before filing a satisfaction of judgment. Generally, a Court Administrator will not question a creditor’s decision to file a satisfaction of judgment and will permit the debt to be fully satisfied, even if the creditor has not collected the entirety of the judgment, including statutory interest. As a result, it is important for creditors to understand how post‑judgment will accrue in the jurisdiction where litigation is undertaken. States have very different post-judgment interest processes and rates. Likewise, a federal court judgment may accrue interest at a different rate than a judgment that was obtained in state court.

In most cases, post‑judgment interest will begin to accrue once judgment has been entered. In Minnesota, the date upon which judgment was entered, as well as the amount of the judgment, determine the applicable post-judgment interest rate. Minnesota Statutes § 549.09 provides the statutory determination for interest accruing on judgments. For judgments entered on or before August 1, 2009, the interest rate is four percent (4%) [1] .

For judgments in Minnesota, entered after August 1, 2009, that are in an amount equal to or less than $50,000.00, the interest rate will generally be four percent (4%) [2]. For judgments that are greater than $50,000.00, and entered after August 1, 2009, Minnesota statutes prescribe a ten percent (10%) interest rate.

Clearly, it is beneficial for Minnesota creditors who pursue entry of judgment in the range of $50,000.00 to ensure that all pre-judgment interest and allowable costs and expenses are pursued, before entry of judgment, to get the benefit of the ten percent (10%) interest rate. Lenders should ensure that the interest rate applied under the loan documents and on their system is the proper rate. Occasionally, creditors overlook their ability to apply a higher interest rate while a debtor is in default. If that results in the judgment being less than $50,000.00, a creditor can potentially lose thousands of dollars in the collection process, because the judgment is accruing four percent (4%) interest instead of ten percent (10%).

This issue is also significant to pursuing the renewal of a judgment. In Minnesota, a judgment will expire after ten (10) years, unless the creditor renews the judgment before the ten (10) year period has lapsed. See n. 1. Renewal of a judgment may be pursued when the creditor has not successfully collected the full amount of the judgment and the ten (10) year expiration is looming. A creditor’s costs and expenses, not otherwise collected, may be pursued in a renewal of judgment action, if allowed by the applicable loan documents.

Working with legal counsel who is experienced in enforcing creditor’s rights can help you get the most from your judgment. For more information on obtaining or enforcing judgments, contact Your Legal Department® at Jellum Law

[1] In Minnesota, judgments are valid for ten (10) years. Minn. Stat. §§ 541.04, 548.09, and 548.091. Therefore, any prior fluctuation in interest rates applied to judgments prior to 2019 is inapplicable.
[2] The interest rate is determined by the one-year constant maturity treasury yield for the most recent calendar month, reported on a monthly basis in the latest statistical release of the board of governors of the Federal Reserve System, rounded to the nearest one percent, or four percent (4%), whichever is greater.