Interesting Judgment Calculations

I am not an attorney, I am a Judgment Broker. When one recovers, collects, or is paid on a judgment in a single lump payment, and there are no recoverable enforcement costs, the total amount owed (including interest) is easy to figure out.

In the case of California, with a simple non-compounded 10% interest rate, the amount due is what the original judgment listed, plus 10% interest per year (and is adjusted for payments and costs).

In California, the daily interest owed is approximately the (principal judgment amount and the costs - payments) divided by 3,650. (The 3,650 is 365 days times 10% interest.) For example, a judgment for $10,000.00 has about $2.734 interest earned per day. Judgment interest is not compounded, except for each time you renew a judgment.

When the debtor makes occasional payments and/or you have substantial recoverable costs, for example, the cost of getting a writ, paying the sheriff, paying a process server, and/or conducting debtor-related exams and document productions, it's not as simple to determine the precise amount due.

If you are going to be paid in full, you must take care not to collect more than is owed. You can figure out what is due by studying laws, doing some research, and carefully calculating what is owed.

If you are enforcing more than a few judgments, it's a good idea to purchase a software program. One good choice is Tvalue from www.TimeValue.com. Tvalue is a general amortization schedule/calculator program, that can be configured to calculate judgment interest. Another specific good choice, is the Excel spreadsheet product available from www.JudgmentProgram.com. In California, costs become part of the judgment (statutorily) after both a memorandum of costs has been filed, and the time limit for objection (by the debtor) has passed. In California, one must claim costs within two years of incurring them.

Unlike interest, costs are added to the judgment. Once costs are added, they increase the interest accrual rate that is itemized on writs. You must truncate interest rates, not round them up. (0.7039 becomes 0.703.) In California, the time limit for the debtor to object to your memorandum of costs, which must be served on the debtor (by first class mail is ok) are 10 days if personally served, and 15 days if you have the debtor served by first class mail. You must fill out page 2 of the memorandum of costs, and have someone else sign and date it, and deposit the sealed and stamped envelope addressed to the debtor, in the mailbox.

Take for example, a judgment of $1,000 awarded two years ago. The judgment earned $100 a year - 10% of $1,000. As example, you spent $300 on process servers, lien recording fees, court fees, levy fees, and writs, over that time.

If you file and serves a memorandum of costs for the judgment, then 15 days later, the debtor will owe $1,000 for the base judgment, $200 interest for 2 years, and $300 for costs.

The debtor now owes $1,500 - but of that amount, only $1,300 will earn 10% interest, so interest now accrues in this example, at $130 per year - starting fifteen days after the memorandum of costs was served. Payments must be applied to the interest first. After this, the payment is added to the principal amount owed. When one uses a sheriff to garnish the debtor's assets, the sheriff gets paid first. When a sheriff recovers money from a debtor with a court writ, payments are applied as follow: First to the Sheriff, Second to cover the cost of getting a writ, Third to accrued interest, Lastly to the principal amount of the judgment including prior court-approved costs. Here is the California Code Civil Procedure section 685.050, showing how amounts collected by the levying officer, are applied to the satisfaction of the judgment, when a writ of execution has been issued:

685.050. (a) If a writ is issued pursuant to this title to enforce a judgment, the costs and interest to be satisfied in a levy under the writ are the following:

(1) The statutory fee for issuance of the writ.

(2) The amount of interest that has accrued from the date of entry or renewal of the judgment to the date of issuance of the writ, as adjusted for partial satisfactions, if the judgment creditor has filed an affidavit with the court clerk stating such amount.

(3) The amount of interest that accrues on the principal amount of the judgment remaining unsatisfied from the date of issuance of the writ until the date interest ceases to accrue.

(4) The levying officer's statutory costs for performing the duties under the writ.

Interestingly, the California judicial council forms for memorandum of costs and writs, can lead to occasionally (and wrongly) showing negative amounts owed, when multiple writs are obtained after a levy has previously been done. This happens mostly because the people who designed these forms wanted to make very sure interest was never compounded.

The solution is to make sure you understand how to calculate judgment interest, and that your memorandum of costs is filled out carefully and correctly, so that writs will not have a negative number.