Interest rates are compensation for the time-value of money, and are calculated on judgments (the amount of money one party to a lawsuit is ordered to pay another party) based on the applicable state or federal statutes. There are often different interest rates set by law for prejudgment interest (the interest on the amount owed before the judgment) and post-judgment interest (the interest on the amount owed after the judgment). The calculation of prejudgment and post-judgment interest rates vary from state to state (and in federal court), and require a careful analysis of the statutes.
In Wisconsin, interest rates on judgments are governed by state statutes, which set forth the rates for both prejudgment and post-judgment interest. Prejudgment interest is the interest accrued from the time the money is owed until a judgment is entered, and Wisconsin Statute § 138.04 allows for prejudgment interest at a rate of 1% per month on an unliquidated claim, unless a different rate is stipulated by contract. Post-judgment interest, on the other hand, is interest that accrues after a judgment has been entered. According to Wisconsin Statute § 815.05(8), the post-judgment interest rate is determined annually by the Wisconsin Department of Administration and is equal to the prime rate plus 1%, subject to a minimum of 5% per annum. This rate applies to all judgments, regardless of whether the underlying transaction involved a contract. It is important for parties involved in litigation to be aware of these rates as they can significantly affect the total amount owed under a judgment.