May 25, 2018

Forgotten Lawsuit Creates Big Problems for Prior Chapter 7 Client

Earlier this month I received a call from a Chapter 7 client that I had represented several years ago.  He is attempting to refinance his house and has discovered that a judgment creditor has a lien for several thousand dollars.  The creditor was listed on the case, but neither he no I knew that there was any judgment.

I directed him to visit the county courthouse and pull the file for this case.  He did and he reports that the return of service shows that his wife was served by a sheriff’s deputy.  His wife has no recollection of being served.  We did list the creditor on the bankruptcy petition but because we did not know that there was a judgment, we did not file a motion to avoid the judgment lien.  What can he do?

There are a number of lessons you can learn from this man’s experience.  First, you should always obtain copies of credit reports from all 3 credit bureaus prior to filing bankruptcy.   In Georgia, you can get a free credit report from each of the 3 main credit bureaus twice a year.  Online, you can go to and download your reports.  Because credit reports obviously contain sensitive information the system will ask several questions to identify yourself.  These are usually multiple choice questions – for example, the system may say “your credit report shows that you previously lived on one of the following streets: (a) Oak Street (b) Thompson Street (c) Ivers Road (d) none of the above.

If you are unable to answer these questions, the system will instruct you to mail away for your credit reports – here is a link to a page on my website with the credit report request letters.

Credit reports are helpful because they will usually show pending lawsuits as well as the names, address, account numbers and debt amounts for most of your creditors.  Obviously I can’t require all bankruptcy clients to bring me credit reports but it sure helps avoid “forgotten” creditors or judgments.

As far as what we can do, there are a couple of options.  First I want to make sure that service of process was correct.  If you are served with a lawsuit in Georgia, the sheriff’s deputy (or private process server) has to complete a document called a “return of service” that states when a party was served and by whom.  Section 9-11-4 of the Official Code of Georgia provides that service on an individual must be made on the defendant himself, or “by leaving copies thereof at the defendant´s dwelling house or usual place of abode with some person of suitable age and discretion then residing therein.”

In this case, if the sheriff’s deputy served my client’s wife, then service is most likely valid.

However, I sometimes see situations where the return of service is unclear as to who was served or even situations where the return of service is blank.  In these cases, a defendant can “collaterally attack” the judgment on the grounds that service was not made and he did not know about the lawsuit.

If it turns out that service is valid, my client will have little choice but to negotiate a settlement of the real estate debt.  Interestingly the Chapter 7 discharge would eliminate any personal liability he might have for this debt, but the liability remains as to his real estate.

My experience has also been that judgment creditors will become more amenable to negotiation the longer a real estate lien remains unpaid.  Here, my client could forego a refinance (or threaten to to forego a refi) and use the argument that the judgment creditor might have to wait for years to get paid as leverage to negotiate a reduced payoff.

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.

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