Many Illinois residents owe some kind of credit card debt. When the payments become too much and you stop paying, it is likely that the credit card company will file a lawsuit against you, haul you into court, and enter a court order which states that you owe a certain amount to them (this is called a “judgment”). But what happens once a creditor gets a judgment against you and how can this new change to the post-judgment interest rate in Illinois really impact you?
A Creditors Judgement Against You
Pursuant to Illinois statutes, once an order granting a judgment is entered (except for a child support judgment as a matter of law), interest begins to accumulate against that judgment.
Two Illinois statutes provide for this: 735 ILCS 5/12-109 (hereinafter “Section 12-209”), and 735 ILCS 5/2-1303 (hereinafter “Section 2-1303”). The first statute, Section 12-209 simply states that all judgments will accrue interest according to Section 2-1303.
2020 Post-Judgement Interest Rate Change for Consumer Debt in Illinois
Section 2-103 was recently amended, effective January 1, 2020. If a creditor obtains a Court-ordered judgment against you for a consumer debt on or after January 1, 2020, the interest rates have changed.
Prior to January 1, 2020, if a credit card company obtained a judgment order against you, no matter how much you owed, interest would accrue automatically in the amount of 9% under the statute. Now, the interest percentage will differ, depending on how much you owe.
If you have a judgment against you for a consumer debt that is $25,000.00 or less, interest on the said judgment will accrue at a rate of 5% per year. If that consumer debt judgment is more than $25,000.00, then the interest will accrue at a rate of 9% per year. Again, this is on consumer debt judgment orders entered on or after January 1, 2020. These interest rates do not apply to judgments entered before January 1, 2020.
Illinois Child Support Interest Rates
Earlier, we mentioned that child support judgments as a matter of law are dealt with separately. Under Section 12-209, interest on child support is calculated on a monthly basis (so each month, the interest rate applied is one-twelfth of the annual percentage rate as set by Section 2-1303).
Child support interest is based on the outstanding balance from the previous month minus any amount paid in excess of the current month’s ordered support amount. This means that at the end of April, for example, interest will accrue on the total child support balance that remained due and owing from the end of March, after any credit for excess amounts paid in April. However, there is no guidance on how interest is dealt with for child support judgments. There is nothing in Section 12-209, Section 2-103, nor is there an answer in our child support statute (750 ILCS 5/505).
If someone’s unpaid support balance is $24,500.00 one month, and $25,001.00 the next month, does that interest rate increase from 5% to 9%? In the alternative, if someone’s unpaid balance goes from $25,001.00 one month to $24,500.00 the next month, does the interest rate decrease from 9% to 5%? In the second situation, the interest rate would not change if someone paid down on a consumer debt judgment against them.
In layman’s terms, the statutes do not tell us if the interest rate may change on a month-to-month basis with an outstanding child support balance. While this may be helpful for individuals stuck in a situation where they are way behind on support by helping them accrue interest much slower as they lower their unpaid balance, it does not provide guidance for family law judges, litigants who may be dealing with a support arrearage issue, or family law practitioners who may be helping litigants through this issue.
Unfortunately, it appears we may have to wait for clarification from the legislature, from the Illinois Appellate Courts, or the Illinois Supreme Court on the application of the new interest rates.
Learn more about the Illinois post-judgment interest law change and how it could impact you by contacting our experienced attorneys.