Except for parenting time, almost everything in an Illinois divorce is about who owes what to whom.
The transfer of assets, debts and other financial transactions are done pursuant to the orders that were entered by the Illinois divorce court. When a transaction that was ordered does not occur on time, the party owed the money has a money judgment.
A money judgment is “a court’s official decision with respect to the rights and obligations of the parties to a lawsuit…A judgment, of course, may require one party to pay money to another.” In re Marriage of Logston, 469 NE 2d 167 – Ill: Supreme Court 1984
In the case of child support or maintenance payments “[w]here a money obligation is payable in installments, a separate cause of action accrues on, and the limitations period begins to run against, each installment as it becomes due.” In re Marriage of Smith, 806 NE 2d 727 – Ill: Appellate Court, 2nd Dist. 2004
“Any maintenance obligation including any unallocated maintenance and child support obligation, or any portion of any support obligation, that becomes due and remains unpaid shall accrue simple interest as set forth in Section 505 of this Act.” 750 ILCS 5/504(b-5)
“A support obligation, or any portion of a support obligation, which becomes due and remains unpaid as of the end of each month, excluding the child support that was due for that month to the extent that it was not paid in that month, shall accrue simple interest as set forth in Section 12-109 of the Code of Civil Procedure.” 750 ILCS 5/505(b)
“Every judgment arising by operation of law from a child support order shall bear interest as provided in this subsection. The interest on judgments arising by operation of law from child support orders shall be calculated by applying one-twelfth of the current statutory interest rate as provided in Section 2-1303 to the unpaid child support balance as of the end of each calendar month.” 735 ILCS 5/12-109(b)
For missed payments, the money owed is the money owed upon when it was actually due to be paid…not based on the date of the order memorializing the amount owed.
“[J]udgments recovered in any court shall draw interest at the rate of 9% per annum from the date of the judgment until satisfied” 735 ILCS 5/2- 1303(a)
9% is a lot! A 9% interest rate will cause the money owed to double every 11 years at simple interest. Good luck getting an investment with that guarantee. From 1992 to 2021, the stock market went up 9.89% (with lots of swings in between).
That 9% rate goes back as far as the court reasonably finds the amount was owed.
“When judgment is entered upon any award, report or verdict, interest shall be computed at the above rate, from the time when made or rendered to the time of entering judgment upon the same, and included in the judgment.” 735 ILCS 5/2- 1303(a)
Interest on an Illinois judgment needs to be calculated a particular way.
“It is well-established in Illinois that this accrual of interest is simple interest and not compound interest.” Halloran v. Dickerson, 679 NE 2d 774 – Ill: Appellate Court, 5th Dist. 1997
Simple interest is “interest paid on the principal only and not on the accumulated interest.” Black’s Law Dictionary (11th ed. 2019)
Compound interest is “interest paid on both the principal and the previously accumulated interest.” Black’s Law Dictionary (11th ed. 2019)
Simple interest accumulates slightly slower than compound interest. For example 9% interest doubles the amount owed every 11 years under simple interest whereas 9% interest doubles the amount owed every 8 years under a compound interest rate.
No one pays what they owe on the anniversary of the money judgment. You have to divide the year to determine how much interest is owed.
“In all computations of time, and interest and discounts, a month shall be considered to mean a calendar month, and a year shall consist of twelve calendar months; and in computations of interest or discount for any number of days less than a month, a day shall be considered a thirtieth part of a month, and interest or discount shall be computed for such fractional parts of a month upon the ration which such number of days shall bear to thirty.” 815 ILCS 205/10
Like most word problems, interest calculations in an Illinois divorce is best explained by example.
“Assume [a judgment of ] $10,000. The…judgment is entered on June 30, 1995. To determine the amount of interest that would be owed on August 7, 1996, the following method applies.
(1) On June 30, 1996, one full year had elapsed. At 9% simple interest, $900 in interest had accrued.
(2) Next, to determine the interest that accrued in July 1996, divide $900 by 12 (months). This means that $75 in interest accrued in July.
(3) Next, divide $75 by 30 (days). This equals $2.50 interest per day. Therefore, for the seven days in August 1996, $17.50 in interest would accrue.
(4) Add together the $900 (interest for one year) and the $75 (interest for one month) and the $17.50 (interest for seven days). This equals $992.50 interest owed on August 7, 1996.” Halloran v. Dickerson, 679 NE 2d 774 – Ill: Appellate Court, 5th Dist. 1997
Interest stops accruing on any amount that is actually paid.
“Interest shall be computed and charged only on the unsatisfied portion of the judgment as it exists from time to time. The judgment debtor may by tender of payment of judgment, costs and interest accrued to the date of tender, stop the further accrual of interest on such judgment notwithstanding the prosecution of an appeal, or other steps to reverse, vacate or modify the judgment.” 735 ILCS 5/2- 1303(a)
The problem is that people who owe money usually want to make a deal when they actually pay what they owe. Don’t be surprised when your ex says “I know I owe you $ 30,000 with interest but if I pay you everything today…how about we knock off the interest.”
Well, I love to negotiate…but it does not work that way. Debts are only extinguished by tender.
Tender is “a valid and sufficient offer or performance, specif., an unconditional offer of money or performance to satisfy a debt or obligation” Black’s Law Dictionary (11th ed. 2019)
“It is settled…that a “tender” under section 2-1303 must be an unconditional offer to pay. The law is also clear that, to satisfy the obligation, the “tender” must include the full amount due and owing, including the judgment, costs, and postjudgment interest; anything less is insufficient.” Jacobs v. Yellow Cab Affiliation, Inc., No. 1-18-2462, 7 (Ill. App. Ct. 2020)(citations omitted)
“As a general rule, a tender must include everything to which the creditor is entitled, and a tender of any less sum is nugatory and ineffective as a tender. [Tender] must include interest due and costs then due as accrued. It is the duty of the debtor to make sure that his tender is sufficient in amount.” Smith v. Gen Co. Corp., 296 NE 2d 25 – Ill: Appellate Court, 3rd Dist. 1973 (citations omitted)
“[A] partial payment of the total amount owed is credited by applying the payment first to the accrued postjudgment interest, and only after all interest has been paid does the judgment amount begin to be reduced by any payments made.” Halloran v. Dickerson, 679 NE 2d 774 – Ill: Appellate Court, 5th Dist. 1997
If you disagree with what you owe, you can still pay what you might owe while you appeal to stop the interest from accumulating if an appeals court does not agree with you.
“[I]t is well established that the payment or satisfaction of a money judgment by a judgment debtor does not bar the prosecution of a writ of error or an appeal by such judgment debtor.” Pinkstaff v. Penn. Railroad Co., 202 NE 2d 512 – Ill: Supreme Court 1964
If you are worried about interest on money owed in an Illinois divorce, the actual amount owed must be significant. Contact my Chicago, Illinois family law firm to speak with an experienced Illinois divorce attorney.