by Joseph E. Sarachek, Strategic Liquidity Fund
For years, distressed investors, trustees, and turnaround professionals have lived with an uneasy question: If a judgment is truly “void,” can it be challenged at any time?
On January 20, 2026, the Supreme Court delivered a clear and definitive answer: no.
In Coney Island Auto Parts Unlimited, Inc. v. Burton, 607 U.S. _ (2026), the Court held that even motions seeking to vacate a void judgment under Rule 60(b)(4) of the Federal Rules of Civil Procedure (“FRCP”) must be brought within a “reasonable time.” The ruling closes a long-standing loophole and brings welcome finality to bankruptcy judgments, especially default judgments that linger for years before enforcement.
The Backstory: A $50,000 Zombie Judgment
The case arose from a familiar restructuring fact pattern. A debtor, Vista-Pro Automotive, Case No. 3:14-bk-09118, 3:15-ap-90079 (USBC MD Tenn Nashville division) obtained a default judgment against a counterparty, Coney Island Auto Parts, after mailing the summons and complaint to the defendant at its McDonald Avenue address in Brooklyn. The summons and complaint was defective service because it didn’t have any corporate officer or individuals name on the mailing as required by the Federal rules.
Coney Island did nothing for six years. Only after a U.S. Marshal seized funds from its bank account did it move to vacate the judgment, arguing that improper service rendered it void ab initio and therefore attackable at any time.
The Bankruptcy Court, District Court, and Sixth Circuit all rejected that argument. The Supreme Court agreed.
The Holding: “Void” Doesn’t Mean Timeless
Writing for an eight-Justice majority, Justice Alito emphasized the plain language of Rule 60(c)(1) of the FRCP : “A motion under Rule 60(b) must be made within a reasonable time.” A motion asserting voidness is still a Rule 60(b) motion and nothing in the rule creates a carve-out for (b)(4).
The Court rejected the long-repeated mantra that a void judgment is a “legal nullity” immune from deadlines. Even serious legal errors, the Court reasoned, are routinely subject to time limits. Allowing unlimited collateral attacks would upend finality across the federal system—from missed appeals to stale jurisdictional challenges.
Why This Matters for Turnaround Professionals
This decision lands squarely at the intersection of bankruptcy enforcement, diligence, and value recovery:
• Finality Has Teeth. Trustees and estate fiduciaries gain greater certainty that old judgments won’t be
resurrected years later by “voidness” arguments.
• Delay Is Risky. Counterparties who ignore demand letters or early enforcement signals do so at their
peril. Silence can make a later challenge untimely—even if service was imperfect.
• Diligence Is Everything. Buyers of claims, litigation funding providers, and restructuring advisors must
assess not just whether a judgment is vulnerable, but when any challenge was (or could have
been)brought. When my investment firm,
• Strategic Liquidity Fund buys judgments from trustees we spend an inordinate amount of time due
diligencing service.
• Enforcement Triggers the Clock. The Court made clear that “reasonable time” is flexible. In default
judgment cases, it may be reasonable to wait until enforcement begins but not indefinitely.
The Big Picture
Coney Island Auto Parts is a win for predictability and estate value. It discourages tactical delay, rewards early engagement, and aligns bankruptcy practice with the Supreme Court’s broader textualist trend.
For turnaround professionals, the message is simple:
Void or not, time still matters.
And in distressed situations, time is often the most valuable and most wasted asset of all.