Determining the amount owed after a court has rendered a judgment often necessitates accounting for the accrual of funds beyond the initial award. This additional sum compensates the prevailing party for the delay in receiving payment. Its determination involves applying a statutory interest rate to the principal amount of the judgment, calculated from the date of the judgment until the date the debt is settled. For instance, if a judgment of $10,000 is awarded and the applicable annual interest rate is 5%, the added funds accumulate at a rate of $500 per year, prorated for partial years or months.
The inclusion of these funds ensures fairness and equity in the legal system. It serves as a disincentive for debtors to prolong payment, encouraging prompt fulfillment of financial obligations. Moreover, it acknowledges the time value of money, recognizing that a dollar received today is worth more than a dollar received in the future. Historically, the practice addresses potential losses incurred by the creditor due to inflation and lost investment opportunities during the period of non-payment.
