On March 23, the U.S. Supreme Court issued a unanimous opinion limiting the rights of litigants to challenge a judgment outside the ordinary appeals process by arguing the judgment is "void." In United Student Aid Funds v. Espinosa (.pdf), the Supreme Court considered an order in a chapter 13 bankruptcy case that approved a plan allowing a student loan debtor to discharge his obligation to pay interest on his loans once he had paid off the principal. The court had erred in approving the plan because a student loan debtor must establish "undue hardship" to obtain an interest discharge in a separate proceeding in which the debtor must serve a summons on the creditor.
Years after the plan was approved, the creditor brought an action to recover the interest and for relief from the judgment under Federal Rule 60(b)(4), arguing that the initial order approving the plan was void.
The Supreme Court disagreed.
Such a collateral attack is available only where the trial court acted without "an arguable basis for jurisdiction" or where the other party’s due process rights were violated. The bankruptcy court certainly had the authority to approve a plan. It simply committed a legal error in not requiring proof of "undue hardship." Further, the lender had actual notice of the proposed plan. The irregularity in not serving a separate summons did not amount to a due process violation. If lender was unhappy with the order approving the plan it had to file a timely appeal.
The lesson to litigants is clear and important. Even if you think that the trial court is acting outside its authority, do not defer an appeal on the theory that the judgment can be attacked as void later on. So long as there is some arguable basis that the court had jurisdiction to enter the order, it must be challenged through a timely appeal.