Don’t Leave Money on The Table – The Illinois Interest Act
Many suits do not seek recovery of interest on money under a contract or interest following the entry of a judgment. This can leave a large sum of money on the table both during negiotiations as well as during the collection of a judgment. In Illinois, interest is available at 5% on many written agreements prior to the entry of a judgment and then at 9% per year on all civil judgments following the entry of a judgmentt.
Prejudgment Interest at 5%
Generally, prejudgement interest is recoverable only where allowed by agreement of the parties or by statute.*1 Under the Illinois Interest Act, creditors are allowed to receive interest at the rate of 5% per year for all money due “on any bond, bill, promissory note, or other instrument of writing; on money lent or advanced for the use of another; on money due on the settlement of account from the day of liquidating accounts between the parties and ascertaining the balance; on money received to the use of another and retained without the owner’s knowledge; and on money withheld by an unreasonable and vexatious delay of payment. *2
To recover prejudgment interest under the Act, there must be a fixed or easily calculated amount due from a debtor-creditor relationship that has come into existence by virtue of a written instrument. *3
However, an exception to this rule exists in equity. “`In chancery proceedings, the allowance of interest lies within the sound discretion of the judge and is allowed where warranted by equitable considerations and disallowed if such an award would not comport with justice and equity.'” *4
The Illinois Interest Act, 815 ILCS 205/1 et seq. provides in part that:
Creditors shall be allowed to receive at the rate of five (5) per centum per annum for all moneys after they become due on any bond, bill, promissory note, or other instrument of writing; on money lent or advanced for the use of another; on money due on the settlement of account from the day of liquidating accounts between the parties and ascertaining the balance; on money received to the use of another and retained without the owner’s knowledge; and on money withheld by an unreasonable and vexatious delay of payment. In the absence of an agreement between the creditor and debtor governing interest charges, upon 30 days’ written notice to the debtor, an assignee or agent of the creditor may charge and collect interest as provided in this Section on behalf of a creditor. 815 ILCS 205/2
Postjudgment Interest at 9%
The Illinois Interest on Judgments statute provides in part that judgments “recovered in any court shall draw interest at the rate of 9% per annum from the date of the judgment until satisfied.” If the judgment is against a unit of local government, a school district, a community college district, or any other governmental entity, the rate is 6% per annum.
Interest is computed and charged only on the unsatisfied portion of the judgment and the judgment debtor can stop the interest from accruing by tendering payment of the judgment with costs and interest due up to the date of tender.
Therefore, in order to seek a full recovery of the loss of use of money, a claimant under a contract should review whether to include a claim for interest pursuant to the terms of the agreement, under the Illinois Interest Act, 815 ILCS 205/2, and then as postjudgment interest following the entry of a final judgment.
