Interest on judgment debts can significantly increase the total amount owed following a successful claim. In England and Wales the rate of interest payable depends on the type of judgment obtained and the court in which it was entered. Many judgment creditors are unaware that interest may accrue on a debt after judgment has been obtained and that this interest can continue to run until the judgment debt is satisfied in full.
When a party successfully obtains judgment through the County Court or the High Court the court may order that interest be payable on the outstanding sum. This interest is intended to compensate the judgment creditor for the delay in receiving payment and to encourage the judgment debtor to satisfy the debt promptly. In some cases interest may form a significant proportion of the total sum recoverable particularly where enforcement action is delayed or resisted.
High Court Judgments And Statutory Interest
Under the Judgments Act 1838 interest is payable on most High Court judgments at a statutory rate of eight percent per annum. This rate applies automatically in many cases and interest generally begins to accrue from the date of judgment until the outstanding debt is paid in full. This means that the amount owed by the judgment debtor may increase on a daily basis until payment is made.
Interest under the Judgments Act 1838 is calculated on the principal sum of the judgment and may also apply to certain costs awarded by the court. Judgment creditors should be aware that enforcement of High Court judgments may therefore result in recovery of both the principal sum and any accrued interest.
Interest On County Court Judgments
Interest on County Court judgments is governed by the County Courts Act 1984. Unlike High Court judgments interest is not always awarded automatically in County Court proceedings. However interest may be awarded at the discretion of the court particularly where the judgment exceeds five thousand pounds or where the claim relates to commercial matters.
The court may also consider whether interest should be awarded from the date on which the cause of action arose or from a later date such as the date of judgment. In certain circumstances interest may be payable at a contractual rate where this has been agreed between the parties.
Contractual Entitlement To Interest
Where a contract provides for interest to be payable on late payment the court may give effect to that term provided that it is reasonable and enforceable. In commercial transactions statutory interest may also be payable under the Late Payment of Commercial Debts Interest Act 1998 which provides for interest to be awarded on qualifying business to business debts.
Judgment creditors should therefore consider:
• Whether interest has been awarded by the court
• The applicable statutory rate of interest
• Any contractual entitlement to interest
• The date from which interest begins to run
• The enforcement options available
Understanding these factors may assist in maximising recovery and ensuring that the judgment debtor satisfies the debt in full.
Enforcing Judgment Debts And Recovering Interest
Once judgment has been obtained the creditor may take steps to enforce the debt and recover any interest that has accrued. Enforcement methods may include applying for a charging order against the debtor’s property seeking an attachment of earnings order or instructing enforcement agents to recover the outstanding sum.
Interest may continue to accrue until the judgment debt is satisfied in full and may therefore increase the total amount payable by the debtor over time. Prompt enforcement action may assist in preventing further delay and ensuring that the judgment creditor receives the sums owed.
If you are seeking to enforce a judgment debt or recover interest due to you legal advice may assist in identifying the most effective enforcement options available in your circumstances.
Contact Penerley Solicitors today to discuss enforcement of your judgment and recovery of interest owed to you.
