Post-Judgment Interest
Interest that accrues on a money judgment from the date of entry until the judgment is fully satisfied. Texas post-judgment interest is governed by Tex. Fin. Code Ch. 304. The current rate is the lesser of (a) prime rate as published by the Federal Reserve, with a 5% floor and 15% ceiling, or (b) any rate specified in the underlying contract. The Texas Office of Consumer Credit Commissioner publishes the applicable rate.
Post-judgment interest is interest that accrues on a money judgment from the date of entry until the judgment is fully satisfied. Post-judgment interest serves two functions: (1) compensating the prevailing party for the time value of money during the pendency of appeal and collection efforts; and (2) providing economic incentive for prompt satisfaction of judgments. Texas post-judgment interest is governed by Chapter 304 of the Texas Finance Code, with a rate framework keyed to the federal prime rate.
The rate framework
Section 304.003 establishes the post-judgment interest rate as the lesser of: (1) the prime rate published by the Federal Reserve as of the date of the judgment, OR (2) any rate specified in the contract that is the basis of the action. The rate is subject to a 5% floor and a 15% ceiling, the rate cannot be lower than 5% or higher than 15% regardless of the underlying market rate. The OCCC publishes the applicable rate quarterly in the Texas Credit Letter. As of recent quarters with prime rates in the 7-8% range, the post-judgment rate has typically tracked the prime rate within the floor/ceiling boundaries.
Contractually specified rates
Where the contract specifies a rate that is below the prime rate (e.g., a 4% commercial loan), the contract rate controls, but the rate cannot be lower than 5% (the statutory floor). Where the contract specifies a rate higher than prime (e.g., a 12% mezzanine note), the prime rate controls, the contract rate is capped by the prime/15% lesser of analysis. Default rates and prepayment penalties in the underlying contract typically do not increase the post-judgment rate above the statutory framework.
Accrual and compounding
Post-judgment interest accrues from the date the judgment is rendered (Section 304.005). Interest is computed on the unpaid principal of the judgment plus the unpaid pre-judgment interest. Section 304.006 provides that post-judgment interest compounds annually. The judgment continues to accrue post-judgment interest at the original rate even if the prime rate changes after entry, the rate is fixed at the time of judgment.
Pre-judgment vs. post-judgment interest
Pre-judgment interest (interest from the date of breach or accrual to the date of judgment) operates under different rules. For statutory and common-law claims, pre-judgment interest typically equals the post-judgment rate but accrues only from a specified starting point, typically 180 days after written notice of claim, or the date the claim is filed (whichever is earlier), under Johnson & Higgins. For contractual claims with a specified pre-judgment interest rate, the contract rate governs subject to usury limits. Pre-judgment interest is added to the principal amount of damages to determine the judgment amount on which post-judgment interest will accrue.
Federal vs. state judgments
Federal court judgments in diversity cases use federal post-judgment interest under 28 U.S.C. § 1961, typically a substantially lower rate than Texas state court (federal post-judgment interest is the weekly average 1-year constant-maturity Treasury yield, often 1-5%). Federal court judgments in federal-question cases also use § 1961. Federal judgments enforced in Texas state court continue to accrue at the federal rate, not the state rate.
Practical impact
For multi-million-dollar judgments pending on appeal, post-judgment interest accumulation is substantial: a $5 million judgment at 8.5% accrues approximately $425K per year in interest. Over a typical 12-18 month appeal cycle, the additional interest can be $500K-$650K. This drives both (a) the appellant's incentive to expedite appeal or post supersedeas bond to delay execution; and (b) the appellee's incentive to resist supersedeas relief. Settlements during pendency of appeal typically include negotiation over the interest component.
For Texas commercial litigants, post-judgment interest is a meaningful component of judgment value but rarely a strategic driver. Best practice: (1) confirm the applicable rate at the time of judgment by reference to the OCCC's published rate; (2) draft the judgment to specify the rate, accrual date, and compounding schedule clearly; (3) for prevailing parties facing appeal, calculate the expected additional interest as a settlement-negotiation factor; (4) for losing parties contemplating appeal, evaluate whether the appeal value justifies the interest cost; (5) for federal-court matters, distinguish § 1961 federal rates from Texas state rates. Disputes over post-judgment interest are infrequent because the framework is mechanical, but rate calculations on judgments entered during rate transitions can require careful analysis.