Volatility, geopolitical instability, trade wars and inverted yield curve were terms that peppered the financial news in 2018.  Notwithstanding the uncertainties surrounding these developments, in December, the Federal Reserve voted to raise interest rates for a fourth time in 2018.  The Fed’s rate hike in December brought the total sequential interest rate increases to nine since the Fed first started raising rates several years ago.

The impact of these rate hikes will, necessarily, raise the costs of borrowing and affect everyone from credit card holders to homeowners with adjustable rate mortgages.

Notably, the interest rates are rising in courts in South Carolina as well.  On January 4, 2019, the South Carolina Supreme Court issued its order regarding interest rates on money decrees and judgments.  Pursuant to state law, the judgment rate “is equal to the prime rate as listed in the first edition of the Wall Street Journal published for each calendar year for which the damages are awarded, plus four percentage points, compounded annually.”  S.C. Code Ann. § 34-31-20(B).  Consequently, for the period of January 15, 2019 through January 14, 2020, the judgment rate in South Carolina will be 9.50% compounded annually.  This rate (up from 8.5% in 2018) represents an increase of nearly 11.8% year over year in the judgment rate.

In addition, creditors in certain types of bankruptcy cases will see some benefit from the rising interest rate environment as well.  On January 14, 2019, the United States Bankruptcy Court for the District of South Carolina announced that, after seeking input from a committee formed to discuss interest rates, the presumptive interest rate in Chapter 13 cases (applicable to secured claims) will be 6.25% for cases filed in the District on or after May 1, 2019.  This rate (up from 6% the prior year) reflects an increase of approximately 4.2% year over year.

The Fed’s interest rate increases as well as those announced by the South Carolina Supreme Court and United States Bankruptcy Court for the District of South Carolina are not surprising and some might say are long overdue.  Unfortunately for some, the interest rate increases also come at a time when hundreds of thousands of government employees (including within the federal court system and U.S. Trustee’s office) are not receiving any pay and are on furlough due to the government shutdown. What other impacts the rising interest rates will have remain to be seen but one thing is clear and that is that higher rates are here to stay.

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