New Calculation of Interest Rates on Judgments

The Michigan Court of Appeals has issued a decision that changes the way interest is calculated on every single Judgment issued by a Michigan Court. Under Michigan Law, interest accrues from the date of filing a Complaint until a judgment is satisfied (paid in full). The current judgment interest rate is 3.48%, up from 3.1% the prior six months. The rate has varied widely over time. It has been over 10% and has been as low as the above-mentioned 3.1%.

Traditionally, interest has been calculated on judgments by using the date of the filing of the Complaint as the starting date. Each January 1^st and July 1^st, the interest rate is recalculated by the State Court Administrator’s Office, and is raised or lowered at that time based on prevailing interest rates.

In Chelsea Investment Group, LLC v. City of Chelsea and Michael Steklac (Click here for a PDF copy), the Court of Appeals ruled that the traditional method of interest calculations was incorrect. The Court ruled that interest is still to be calculated starting at the date of filing of the Complaint, but the interest rate is to be adjusted every 6 months from the date of filing. In other words, every January 1^st and July 1^st the judgment interest rate will be recalculated, but the adjusted rate will not apply to a particular case until the next six-month anniversary of the filing of the Complaint. It may seem like a minor tweak, but in many cases this delay in the interest rate change will drastically affect the total amount of the Judgment. Who is benefited or harmed will depend on whether the Judgment interest rate goes up or goes down.

The Court of Appeals did not address whether this change is retroactive, and it is unclear how this ruling will apply to a case previously filed or a Judgment previously entered.