Calculating Judgment interest

[tim_b]

What is the name of your state?
NY, but I'm trying to figure out if this is a statutory thing or a federally regulated thing.

How exactly is judgment interest calculated? I mean mathematically. Almost all the bylaws I have read will say "per annum" or some effect thereof, but nowhere does it seem to be broken down how this is supposed to be done. I've seen some judgments that breakdown the math for you, and it divides the interest rate by the number of days in a year, then finds out the number of days between the entry of judgment and today's date. It then concludes with a simple multiplication of the three numbers.

Let me demonstrate my confusion over this method. Lets assume this example:
A judgment of $1,000.00 awarded at 12% per annum on 1/1/2015. Let's pretend today's date is 1/1/2018 for simplicity's sake.
12% a year is 0.0328767% per day.
1/1/2015 to 1/1/2018 is 1096 days.
1096 * 0.0328767% * 1000 = 360.328767123288.
We round to the nearest cent I suppose, to $360.33 interest.

Okay, but wait a second.

The verbage is "12% per annum" 1/1/2015 to 1/1/2018 is 3 years. That should be 12% per year, which is an easy multiplication that gives you $120.00 per year. 3 years is $360.00. This should be the correct answer as far as I'm aware. This is the most literal interpretation of the word of the law to mathematics principal, but everywhere else they seem to do leaps and bounds to break the system down into a daily one that just doesn't add up, and this seems to be accepted?

Where did the extra 33 cents come from? Is the leap year to blame? if we use 365.25 days in a year to account for it (which I also see some states doing), the math still comes out to $360.08.

Is there any federal regulation how this interest is supposed to be calculated? Or is it up to states to disseminate how they want it to be done?(if it's either of these two I've yet to find it on any government resource) Or is it a free for all with no real attention and everyone everywhere just glances at the numbers, shrugs, and says "Eh. I guess this looks right." as long as it comes close-ish?

 

[Litigator22]

What is the name of your state?
NY, but I'm trying to figure out if this is a statutory thing or a federally regulated thing. (?)

How exactly is judgment interest calculated? I mean mathematically. Almost all the bylaws I have read will say "per annum" or some effect thereof, but nowhere does it seem to be broken down how this is supposed to be done. I've seen some judgments that breakdown the math for you, and it divides the interest rate by the number of days in a year, then finds out the number of days between the entry of judgment and today's date. It then concludes with a simple multiplication of the three numbers.

Let me demonstrate my confusion over this method. Lets assume this example:
A judgment of $1,000.00 awarded at 12% per annum on 1/1/2015. Let's pretend today's date is 1/1/2018 for simplicity's sake.
12% a year is 0.0328767% per day.
1/1/2015 to 1/1/2018 is 1096 days.
1096 * 0.0328767% * 1000 = 360.328767123288.
We round to the nearest cent I suppose, to $360.33 interest.

Okay, but wait a second.

The verbage is "12% per annum" 1/1/2015 to 1/1/2018 is 3 years. That should be 12% per year, which is an easy multiplication that gives you $120.00 per year. 3 years is $360.00. This should be the correct answer as far as I'm aware. This is the most literal interpretation of the word of the law to mathematics principal, but everywhere else they seem to do leaps and bounds to break the system down into a daily one that just doesn't add up, and this seems to be accepted?

Where did the extra 33 cents come from? Is the leap year to blame? if we use 365.25 days in a year to account for it (which I also see some states doing), the math still comes out to $360.08.

Is there any federal regulation how this interest is supposed to be calculated? Or is it up to states to disseminate how they want it to be done?(if it's either of these two I've yet to find it on any government resource) Or is it a free for all with no real attention and everyone everywhere just glances at the numbers, shrugs, and says "Eh. I guess this looks right." as long as it comes close-ish?

While we're struggling with this enigmatic "33 cents" perhaps you could be more explicit with some of your riveting-ish verbiage. Like helping us come up with a practical distinction between a "statutory thing" and a "federally regulated thing"?

 

[quincy]

I think tim_b is asking if the interest is calculated based on state law or federal law.

Unlike some states, in New Jersey post judgment interest is not compounded until the judgment is renewed.

Here is an old thread on post-judgment interest in New Jersey: https://forum.freeadvice.com/threads/post-judgment-interest-new-jersey.499052/

Not sure that answers his question about 33 cents.

 

[tim_b]

Yes, I supposed I used flowery language with no real benefit.

Is the method of mathematically calculating post judgment interest regulated by any legal body? Is it regulated on a state-level or federal-level? How do I know how I'm supposed to calculate post judgment interest with which formula? There doesn't seem to be any actual maths for it in any legal texts. Let me give you guys some examples:

Massachussets:
https://malegislature.gov/Laws/GeneralLaws/PartIII/TitleII/Chapter231/Section6C

In all actions based on contractual obligations, upon a verdict, finding or order for judgment for pecuniary damages, interest shall be added by the clerk of the court to the amount of damages, at the contract rate, if established, or at the rate of twelve per cent per annum from the date of the breach or demand.

California:
https://law.justia.com/codes/california/2007/ccp/685.010-685.110.html

Interest accrues at the rate of 10 percent per annum
on the principal amount of a money judgment remaining unsatisfied.

New York:
https://www.nysenate.gov/legislation/laws/CVP/5004

Interest shall be at the rate of nine per centum per annum, except where otherwise provided by statute.

So what per annum means, is "every year", correct? So that should be pretty straight forwards I thought, until I saw this copy of a Massachusetts judgment:

Line 4 is breaking down the judgment interest to a daily rate, and then doing a flat multiplication across the entire principal on line 6. I understand this is calculating prejudgment interest, but does that mean the same method is allowed to be used for post judgment interest? It's inaccurate if it's used in either technique, thus the 33 cents from earlier.

 

[tim_b]

I think tim_b is asking if the interest is calculated based on state law or federal law.

Unlike some states, in New Jersey post judgment interest is not compounded until the judgment is renewed.

Here is an old thread on post-judgment interest in New Jersey: https://forum.freeadvice.com/threads/post-judgment-interest-new-jersey.499052/

Not sure that answers his question about 33 cents.

I just read the thread. It says no where in there that interest is compounded at all. In fact it's an emphatic assertion that all post judgment interest is simple interest for the entirety of the life of the judgment. Maybe that was the wrong thread you've linked?

 

[quincy]

I just read the thread. It says no where in there that interest is compounded at all. In fact it's an emphatic assertion that all post judgment interest is simple interest for the entirety of the life of the judgment. Maybe that was the wrong thread you've linked?

I don't think it was the wrong thread for what I was saying - but I mistakenly read your state as being New Jersey rather than New York. In New Jersey, post judgment interest is not compounded. It is simple interest.

But, since it does not (necessarily) apply to New York, you can ignore my post and wait for someone to post something applicable to you in New York.

Sorry if my post confused.

 

[tim_b]

No problem! The only places I've ever heard of interest getting compounded is on a judgment renewal in Ohio. When an Ohio renewal occurs it tabulates all the outstanding interest and tacks it on as a new "judgment" amount, and interest builds from there... I think. I was hoping that the answer to my questions was more general. Maybe a federal statute that starts off "For the purposes of calculating judgment interest, it is declared that the proper form is to take the principal and to......" Maybe that's too hopeful.

 

[quincy]

No problem! The only places I've ever heard of interest getting compounded is on a judgment renewal in Ohio. When an Ohio renewal occurs it tabulates all the outstanding interest and tacks it on as a new "judgment" amount, and interest builds from there... I think. I was hoping that the answer to my questions was more general. Maybe a federal statute that starts off "For the purposes of calculating judgment interest, it is declared that the proper form is to take the principal and to......" Maybe that's too hopeful.

It will be state law not federal law that you need to look at.

 

[tim_b]

It will be state law not federal law that you need to look at.

I'm a bit concerned that this isn't written anywhere, though. I don't think there's a statute that actually says what the math formulas are. Everything I've read just assumes people know what they mean by "interest per annum." How does that break down day by day? That's really what I'm getting at. Is there a regulation by any state body, if not federal, that says "This is the correct way to calculate per annum interest day by day."?

I don't think there is.

 

[Zigner]

I don't think there's a statute that actually says what the math formulas are.

Not a "statute", but there is a court rule: http://www.nycourts.gov/courts/nyc/civil/judgments_atty.shtml#interest

 

[tim_b]

Not a "statute", but there is a court rule: http://www.nycourts.gov/courts/nyc/civil/judgments_atty.shtml#interest

That's very interesting. Thanks for this. This is the same method as illustrated by the document I shared with MA, only they appear to handle the leap year differently. Either way, here's the critical part of it as far as I can tell:

Effective June 26, 1981, standard interest is to be calculated at 9% per annum. The Monthly Interest Rate is 0.75%, and the Weekly Interest Rate is 0.173%. The formula for calculating interest is:

Principal x Annual Rate x Number of Months divided by 12, or

Principal x Annual Rate x Number of Days divided by 365/366.

That's the formula they provide, x being multiplication. I'm actually quite estatic that there's anything at all written down, but is there no concern that the two formulas don't equal each other mathmatically? Look at this table I built:

On 1/8/2018, after just one week, the amount of interest accrued is $17.26 using the daily calculation, and $17.30 using the weekly rate. Is it the case that I could legally say that the amount accrued from interest is both 17.30 and 17.26 simultaneously? Then after 1 month it should be $75 exactly using the monthly rate, but if I look at daily it's short at $73.97? If monthly is supposed to kick in on Feb 1st, then it still doesn't add up:

Now the daily rate calculation is over by $1.44 from the monthly. At this point can I legally say the interest accrued is $76.44, or $69.20, or $75.00? Doesn't this somewhat violate Section 807(2) of the FDCPA?

 

[Zigner]

7 days is not one quarter of a calendar month.

 

[Zigner]

I have to ask - why are you so concerned about this?

 

[Zigner]

Oh - and 1/1 is not zero days.

 

[tim_b]

Oh - and 1/1 is not zero days.

You can say 1 day's worth of interest has accrued on the date you've obtained a judgment? The judge stamps the document saying $10,000 is due and then immediately it is owed $10,000 plus 1 day's worth interest?

7 days is not one quarter of a calendar month.

Sure, but the regulation makes the distinction that a week's worth of interest is .173%. I figured if the regulation allows for it, it's somewhat worthwhile in expounding.

I have to ask - why are you so concerned about this?

This started because I'm a project manager on designing a database/system that calculates interest on judgments. I work in the legal field, but math is my background. Accuracy is important to me. When I tried to dig and find an accurate answer it appeared there wasn't one. This bothers me on a fundamental level I suppose, so if there is an answer I want to find it.