RECENT CHANGES IN KENTUCKY LAW AFFECTING PREJUDGMENT AND POSTJUDGMENT INTEREST (revised)

Excellent post – a must read for bankruptcy and creditor attorneys.

Chapter 13 Trustee, EDKY: Trustee's Blog

Bankruptcy practitioners need to know about recent changes in Kentucky law affecting:  (1) a creditor’s right to prejudgment interest; and (2) the statutory rate of postjudgment interest.

Prejudgment Interest:  Common scenario:  Debt buyer buys charged-off credit card accounts for pennies on the dollar, then sues the consumer to try to collect.  The lawsuit asks for prejudgment interest at 8% per KRS 360.010.

According to a February 2017 opinion of the Kentucky Supreme Court, the creditor is not entitled to prejudgment interest after the debt has been charged off.

Under Kentucky law, when the credit card account was first opened, the original creditor got to choose between interest at 8% per the statute and interest at a different rate set out in a contract.  By choosing a higher contract rate (like 27% on a credit card account), the creditor extinguished its right to ask for the 8% statutory interest rate. …

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