Judgments in Florida have an interest rate

Wed, Jun 6, 2012

Bankruptcy, Debt Mitigation

Judgments in Florida have an interest rateJudgments occur when someone owed money files papers with the court asking for a court ordered lien against a debtor. Creditors file these as a way to recoup money for debts owed them. They also tack on interest on top of that money.

Creditors usually wait a while to file judgments and pursue collection efforts themselves or through the help of a debt collection agency or attorney. After repeated attempts to collect money for debts that a debtor is no longer paying for, the creditors often seek court assistance to receive the money that is owed them. Judgments are prioritized and older ones take precedent over newer ones. Therefore, it is not unusual for creditors to scramble to file first.

Creditors approach the court with proof that they are owed certain amounts of money. (This amount usually has fees and interest tacked onto it.) Once the court finds the documents to be in order, they will schedule a hearing. Debtors are advised of this hearing—often through a process server.

Debtors should definitely attend these judgment hearings for many reasons. It is often a debtor’s last chance to discuss the debt or dispute it. Often judges will listen to testimony about the debt and sometimes a settlement can be achieved. If a debtor does not attend the trial, the judgment is usually automatically processed and filed in court records.

Once a judgment is filed, it stays in court records for a long period of time. In Florida, the current life of a judgment is 20 years.  See this recent Florida Bar article discussing the time period for judgments. It is best not to count on the judgment being around for only a limited amount of time.

Creditors often have trouble collecting the debts owed to them through judgments, but certain laws were created in an effort to allow them to do so. The judgment follows the debtor and can interfere with home sales, lottery winnings, inheritances, and other events of this type. Luckily homesteaded property is mostly exempt, but other types of personal and real property is usually not. The Florida Bar has an informative page on their site that details the ins and outs of debtor’s rights in Florida.

The creditors can garnish wages using court orders that require employers to take out certain percentages of the debtor’s income right from a paycheck. Checking and saving accounts can also be confiscated in an effort to repay the debt. While certain income is excluded, this can definitely devastate families that are already struggling. For further information, Sarasota county offers information about how judgments are filed and debts can be collected on their website.

Some are surprised that judgments also come with interest rates. Just like fees and interest are tacked on to the final amount someone owes, interest is tacked onto the judgment for its lifetime. Florida has statutes for setting this interest rate and the rate is updated quarterly—on December 1st, March 1st, June 1st, and September 1st. The most current guidelines can be found here, on the Florida Department of Financial Services website.  Judgment interest is now set according to the promulgated rate existing on the date of judgment, and is adjusted annually according to the rate in existence as of January 1 of every year.  Interest rates are no longer fixed for new judgments rendered in Florida (but they used to be).

Do not ignore the threat of a judgment and ideally, do not let it come to that point. Debt modification and bankruptcy are options to consider if you are in financial crisis.  Attorney Christopher Smith has extensive experience in judgments and debt collections.

Image Credit: Naval History & Heritage Command

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