A “Deadbeats Don’t Pay Interest” Rule?

I’m scratching my head on this one. Maybe you can help me understand. This is Horwitz v. Horwitz, Case No. 2040760 (Ala. Civ. App. May 19, 2006). It’s actually the third time the case has been before the Alabama Civil Court of Appeals, because of a history of controversy about the husband’s failure to make the payments the trial court had ordered him to make to or for the benefit of his divorced wife. The issue that has me bumfuzzled is the appeals court’s approach to interest due on the judment.

To make a long story a little less long, the trial court had awarded judgment in favor of the wife for unpaid alimony in the amount of $206,809, plus interest (and the trial court later clarified that interest accrued at 12%). Then the trial court found that the husband had presented “extenuating and mitigating circumstances as to his limited ability to pay,” so the trial court determined that $1,000 per month was a reasonable amount for the husband to pay each month.

The trial court said that the payments should stop on the remarriage or cohabitation of the wife, but the appeals court properly reversed this portion of the trial court’s ruling. Past due installments of alimony and child support payments become a debt of record and may be collected like any other judgment, so any requirement that the creditor remain unmarried to collect them is improper.

The issue I don’t yet understand is the way the appeals court dismissed the wife’s argument about the interest due on the judgment. Let’s think about it. Husband owes $206,809. The first year, he pays $1,000 per month, or $12,000. During that same year, he accrues 12% interest, or about $24,000. If the balance due accrues interest as the trial court ordered, that means the balance on the judgment increases each year rather than decreases.

The appeals court affirmed the trial court’s ruling, and it defended its decision by reference to Ala. Code § 8-8-11, which provides that in the case of a judgment for child or spousal support, any partial payment shall be applied first to the principal, and the remaining balance, if any, shall be applied to the interest.”

The appeals court stated that with payments of $1,000 per month, ($12,000 per year), the principal amount of $206,809 will be paid in 17.23 years. That is, the appeals court calculated that the interest the trial court ordered no longer applied. Why would that be?

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