Before 2011, calculating interest on court judgments was simple – just use the daily rate for the days the judgment was owed. But a law change in 2011 made it way more complicated. Now, the interest rate is recalculated every quarter and adjusted annually. This change applies to most judgments, including overdue support payments. It used to be a simple calculation, but now it takes a lot more time and work. The statutory interest rate on support arrearages is now recalculated every quarter and the interest rates on judgments are recalculated annually. This creates a logistical nightmare for family law practitioners, especially with the impact of leap years.
When calculating interest on missed support payments, each missed payment earns simple interest for the first year and then earns interest for each full year thereafter, plus the final year’s interest to the valuation date. The total amount for each previous year is due on January 1, and simple interest is applied to the full amount in the same way it’s applied to a single judgment amount. The final payments involve a partial year, like the first year, but with a different valuation date.
In simpler terms, the amount of interest on missed payments can be calculated using a formula, even though months have different numbers of days. The formula is (n)(n+1)/2 multiplied by a single payment (P) and the monthly interest rate to determine the total interest on all payments for that year. Calculating interest on support arrearages can be confusing, but it can be simplified into four steps using tables A and B.
Step One: Use Table A to calculate the interest on missed payments during the first year after a judgment is made for support arrearages. The interest rate changes quarterly, so each missed payment may have a different interest rate.
In 2011, for example, the first three quarters had an interest rate of 6 percent, and the final quarter had a rate of 4.75 percent. This means that payments missed in the first nine months of the year would have a different interest rate than payments missed in the last three months. Step two is about figuring out the interest on the missed support payments from previous years. We add up all the missed payments from the last year and figure out the interest on that total amount. Then we keep adding interest at the same rate until the end of 2011. After that, we use a new interest rate for any missed payments in 2012 and 2013. This step is easier because we only have to calculate interest for whole years, so we don’t have to worry about daily rates or leap years.
In step three, we use a table to figure out the interest on the missed payments for the final year. This is just one calculation. For example, if we get the payment on April 1 in the final year, we use the information from the table to figure out the interest for the last three months’ worth of missed payments.
Step four is where we add up all the interest we calculated in steps one, two, and three to find out the total amount of interest owed for all the missed support payments. Tables A and B are used to calculate the interest on consecutive support payments. Each day of the year is given a point and all points are added up for the interest on payments due. This makes the process simpler and requires fewer calculations.
For example, if support payments are $1,000 per month and the first missed payment is on March 1, 2010, we can use the tables to calculate the interest. The interest rate for 2010 is 6 percent, and the 2010 payments continue to accrue interest at this rate until the law changes in 2011. After that, the interest rate is recalculated.
Using Table A, we can calculate that the total interest for the first 10 payments in 2010 is $276.66. This shows how the tables are used to calculate interest on consecutive support payments. “A person missed alimony payments of $4,000 per month starting in February 2012. They made a final payment in April 2013 to catch up on all the missed payments. They have to pay a total of $3,038.06 in interest on the missed payments.” To figure out the interest owed on missed child support payments, you can use a formula to calculate the amount. First, you calculate the interest for the missed payments in the first year. Then, you calculate the interest for the amount still owed from those missed payments in the second year. Lastly, you calculate the interest for any missed payments in the final year. Add all these amounts together to get the total interest owed. If you need to make payments over time, the calculation works like a mortgage or loan, but with simple interest instead of compound interest. Repaying missed payments on family law judgments can be complicated. When payments are missed, a new interest rate is applied, which raises the question of which rate applies. The interest rate is meant to compensate for the lost time value of money. It’s important to understand that missed payments are charged interest and the repayment is credited interest based on the date it’s repaid. This is the only practical way to interpret repayment for attorneys collecting support arrearages. To calculate the interest on missed payments and repayments, a formula using daily interest rate and payment amount is used. For example, if a payment is due on December 1, it will have 31 days of interest applied to it. Each missed payment adds more interest to the next one. So, for example, the November 1 payment has 61 days of interest added to it, while the December 1 payment has 31 days of interest added to it. The total interest for all missed payments adds up, and the same calculations apply for leap years. In table B, the process is reversed, but the result is the same as in table A. To sum it up, when it comes to calculating interest on late support payments, it’s important to be careful and avoid mistakes. The amount of interest can change depending on things like leap years or changes in the interest rate. It’s like crossing a busy intersection â you need to be cautious and pay attention to avoid accidents. The official interest rate can be found on the Florida Chief Financial Officer’s website. If a judgment is entered in a court case, the amount owed may increase each year because of interest. The interest rate is based on the date the judgment was entered. This applies to unpaid support payments, like child support or alimony. The interest is calculated using a simple interest formula, not a compound interest formula. If support payments are late, the person who is owed the money can ask for interest to be added from the date the payments were due. This section explains how to calculate interest on payments made over multiple years. It uses specific daily interest rates and payment amounts to show the calculations. The goal is to simplify the process and make it easier to understand. For example, it shows how to calculate interest for different years, taking into account leap years and changing interest rates. Overall, it’s a detailed explanation of how to calculate interest on payments. The total interest earned on a $10,000 debt over three years was calculated by adding the interest rates for each year. This gave a total interest rate of 11.9212 percent. Multiplying this rate by $10,000 gave a total interest of $1,192.12. An additional 90 days of interest in 2013 was calculated to be $11.712. The total interest earned over three years was $2,043.31.
The interest rate used for these calculations was 4.75 percent per annum. For a more recent debt, the interest earned over 90 days was calculated to be $23.42, and the total interest for that debt was $3,038.06.
For a larger debt, the interest earned over 90 days was calculated to be $515.34, and the total interest for that debt was $1,656.64.
These calculations are based on Florida law and the treatment of statutory interest as simple interest.
The chief financial officer in Florida calculates statutory interest rates by using the Federal Reserve’s discount rate. Marc Brawer is a certified family law expert and now focuses on mediation and arbitration. Jerry Reiss is an actuary. This information is provided by the Family Law Section.
Source: https://www.floridabar.org/the-florida-bar-journal/the-intersection-of-f-s-55-03-and-florida-family-law-statutory-interest-calculations-for-past-due-support-payments/
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