How Interest Affects Your Divorce Judgment, Maintenance, and Child Support Obligations Including New HFS Procedure as of January 1, 2021

 Posted on January 05, 2021 in Divorce

Interest on Divorce Judgments

The question of whether interest applies within the context of a domestic relations proceedings depends on the nature of the obligation—whether it be child support, maintenance, or a property obligation. The Illinois Code of Civil Procedure provides that judgments recovered in any court shall draw interest at the rate of nine percent per annum from the date of the judgment until satisfied. But does this apply to your divorce decree?

Interest on Child Support and Maintenance

While it wasn’t always the case, in 2000, Illinois clarified its legislation by requiring mandatory statutory interest on all missed child support payments. Specifically, the law states that a support obligation, or any portion of a support obligation, which becomes due and remains unpaid at the end of each month, shall accrue simple interest. Later, in 2006, this same principle became the law  for maintenance as well. The law provides that 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. In other words, 9% interest is mandatory for unpaid child support and/or maintenance obligations.

Keep in mind that even though this interest is mandatory, it doesn’t get automatically tacked onto an unpaid arrearage. The only way to enforce statutory interest (whether for support or otherwise) is to go back to court and ask the Judge to enter a judgment for the interest due. This is what is referred to as “adjudicated interest.” In the past, the Division of Child Support Services with the Illinois Department of Healthcare and Family Services would automatically charge interest on past-due child support balances, however, this is no longer the case. As of January 1, 2021, the Division of Child Support Services (DCSS) will not automatically charge interest on past-due child support arrearages. Moreover, effective January 1, 2021, any interest not pursuant to a judgment (i.e., any unadjudicated interest) will be removed from the balance being enforced by DCSS. While DCSS will still offer assistance to individuals requesting adjudication and enforcement of interest, it will only do so on a one-time basis and if certain criteria are met (ex: the emancipation of the youngest child) This means that you would have to wait until child support has terminated before DCSS will assist in enforcing interest on past due child support.    

Interest on Property Obligations

What does this mean for the property obligations within your divorce decree? Do you get 9% interest on your portion of the IRA that was awarded to you but your ex never followed through on transferring? Or on the award of attorney’s fees that was never paid? The answer to this question is not quite as clear cut and hinges on the specific facts of your case.

The pivotal case in Illinois on this issue is Finley v. Finely. While the case involved the question of interest on a child support obligation prior to the enactment of the law requiring mandatory interest, its reasoning still applies to cases other than child support and maintenance. Finley stands for the proposition that interest may be awarded as a discretionary matter because a divorce proceeding may be likened to a chancery proceeding. Finley v. Finley, 81 Ill. 2d 317 (1980). In Finley, the Court reasoned that a “divorce proceeding partakes so much of the nature of a chancery proceeding that it must be governed to a great extent by the rules that are applicable thereto. In a chancery proceeding, the allowance of interest lies within the sound discretion of the trial judge and is allowed where warranted by equitable considerations and is disallowed if such an award would not comport with justice and equity.” In other words, in a proper case, equitable considerations permit a court of equity to allow or disallow interest as the equities of the case may demand. Id.; See also, Groome v.Freyn Engineering Co., 374 Ill. 113, 131 (1940).

One illustrative example is the case of In Re Marriage of Carrier, which involved a property settlement as it related to a marital IRA. A husband and wife were divorced in June 2000, and the court entered the divorce decree that adopted the parties’ settlement agreement. That agreement provided, among other things, that the husband would transfer $725,000 from his IRA to his wife. When the wife's financial advisor was not able to effectuate the transfer, the wife's attorney asked for the husband's help. The husband initially cooperated but the trial court found that his cooperation ceased in September 2000. By the time the court heard the wife's motion for an order to show cause, the husband's IRA was worth $120,000 less than it was worth when the parties divorced. The appellate court, applying Finley, held that the decision to award interest on any dissolution judgment was a discretionary matter for the trial court and the trial court did not abuse its discretion by awarding the wife post-judgment interest after it found that the husband failed to take steps necessary to effectuate the court’s order to transfer $725,000 from his individual retirement account to the wife. In re Marriage of Carrier, 332 Ill. App. 3d 654 (Ill. App. Ct. 2d Dist. 2002). The Court ultimately awarded the Wife interest from September 2000 since the delay in effectuating the transfer from that date onward was solely attributable to husband.

Another example involves whether an award of attorney’s fees should have accrued statutory interest. In this case, Robinson v. Robinson, the trial court ordered the defendant to pay the attorney fees of the plaintiff's attorney. When the defendant subsequently failed to pay the attorney fees, the plaintiff sought a motion in the trial court to enter judgment against defendant for the amount of the attorney fees plus statutory interest. The Court ultimately held that the trial court’s refusal to award interest was not an abuse of discretion where there was nothing in the record to show any explanation for the defendant’s failure to pay the judgment, nor did the plaintiff argue that an award of interest in this case would be equitable. Furthermore, because the plaintiff did not bring his motion to enforce recovery of attorney fees until almost nine years later, the equitable considerations of the case supported the trial court’s disallowance of statutory interest.

Being able to effectively argue either for or against an award of statutory interest involves a careful review of the facts and circumstances of your case. Please contact our office to set up a free consultation if you have questions regarding your rights.