What interest rate applies?
The law of governing interest rates on money judgments can be a bit confusing. In essence, two key facts dictate what law applies:
- whether there was written instrument, and
- when lawsuit was filed.
First, was the lawsuit based on a written instrument?
- Yes. If the answer is yes, then you may have the interest rate on the instrument apply instead of the statutory code. Next step, when was it filed?
- Filed on or after July 1, 2002? If yes, look to the following:
- Specified. If the interest rate is specified in the written instrument, then that will be the interest rate for the judgment. However, the interest rate cannot exceed 13% per year compounded annually. If the rate was illegal at the time of execution then it is considered as unspecified (see right below).
- Variable or Unspecified. If the interest rate is variable or unspecified, then follow the chart on the second page of the article. Look by date of filing to see what interest rates apply. The last column gives the total interest rate. Note: The interest rate will change every 6 months, see below for more details.
- Filed after July 1, 1987 but before July 1, 2002? If yes, look to the following:
- Specified. If the interest rate is specified in the written instrument, then that will be the interest rate for the judgment. However, the interest rate cannot exceed 13% per year compounded annually. If the rate was illegal at the time of execution then it is considered unspecified (see below).
- Variable or Unspecified. If the interest rate is variable or unspecified, the rate is 12% per year compounded annually.
- Filed on or after July 1, 2002? If yes, look to the following:
- No. If the answer is no, then follow the chart on the second page of the article. Look by date of filing to see what interest rates apply. The last column gives the total interest rate. Note: The interest rate will change every 6 months, see below for more details.
What is a written instrument?
Most commonly these are contracts, promissory notes, negotiable instruments, etc. More often than not, if there were written documents at center of the dispute about terms of payment, money owed, and interest due, then the law suit likely involved a written instrument. However, if the matter is unclear to you, the court recommends you consult an attorney.
When does the interest rates change?
For interest rates on the chart, the rate will change every six months. The rates change on Jannuary 1 and July 1 of every calendar year. The rates are calculated as follows:
the average of interest paid at auctions for 5-year United State Treasury Bonds during the preceding six months + 1% statutory rate
What about judgments from file dates before July 1, 1987?
For more information about how interest rates apply those judgments, you may consult MCL 600.6013(2)–(4).
What are future damages?
Future damages are awards in a money judgment for future expenses relating to subject matter of the law suit. Commonly, these are things like future medical expenses. Interest is not allowed on future damages from the date of filing the complaint to the date of judgment.
Note on Settlements
In general, settlements will follow the settlement agreement unless against clearly against law or public policy.