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Now You See Em’, Now You Don’t: Solving the Problem of the Disappearing Debtor

By Matthew J. Bialick and Jack Atnip III

Isn’t it fascinating how the same individual who acts like your best friend when seeking a loan suddenly falls off the map once a default has occurred?  This can range from the debtor being sluggish in returning phone calls, to literally hiding from the bank for days or weeks on end.  Apart from the problem of inhibiting the ability to talk through a resolution, this is problematic for banks because it can entirely thwart the bank’s ability to bring a lawsuit in connection to its collection efforts.

Under Minnesota law, when bringing a lawsuit or even initiating a foreclosure by advertisement, the relevant legal documents- in most cases- need to be personally served on the debtor.  While this rule is rooted in notice and fairness, it can often be abused by debtors.  Most of the time the reality is the debtor knows full well they owe money and that the bank is trying to collect it, but the debtor can buy time by being evasive.  Fortunately, however, a recent Minnesota court ruling has made it a little easier for the bank to serve legal papers on the disappearing debtor.

In Drews v. Federal National Mortgage Association, the Minnesota Court of Appeals faced a situation where a process server had attempted multiple times to serve a debtor who was apparently hiding in his house.  On the last attempt, the process server noticed a man resembling the debtor through one of the house windows.  The window was open, but there was a screen covering the opening.  Seeing this, the process server told the debtor through the screen he was serving him with legal papers and would be taping the documents to the debtor’s door.  Despite this, the debtor refused to bring in the documents and later claimed he never received them.  The Court rejected the debtor’s argument that service was defective, reasoning that the debtor was clearly evading service, and he could both hear and see the process server attempting to serve him.

In the wake of this decision, banks now have a bit more latitude when it comes to serving legal documents on a debtor.  While strict compliance with service requirements is always best, now posting legal documents on a debtor’s door may be considered proper service, if reliable evidence indicating the evasive debtor saw and heard the process server and was clearly aware service upon him was being attempted.  Perhaps a small victory, but a victory nonetheless.

They say one’s home is their castle, and, personal service is king, but the smug debtor who is too dismissive of the legal process may find himself playing the part of the court jester.