Sued by Channel Partners: 7 Things That Happen Next

If Channel Partners Capital filed suit and sued your company over a breach of contract, and you personally on your guarantee, then here is what happens. You, or your company, have about three weeks from service of process to answer. You will need the right lawyer (or lawyers) to do it. The alternative to answering is a default judgment. After that, the typical next steps are garnishments and levies.

1. You get served

It is really a simple moment. Someone arrives and hands you a stack of papers. The papers that you get will be a Summons and a Complaint. These papers will describe what Channel Partners has sued for (breach of contract and guaranty). It helps to know who is suing you. The plaintiff is Channel Partners Capital, a Delaware company headquartered in Minnesota that finances business equipment. In one 2024 federal case in Pennsylvania it sued the business for breach of contract and its president on his personal guaranty. In Minnesota, sometimes the papers, particularly when you get them for the first time, will look like nothing much. There may be no court file number at the top of the page. You may be able to visit the website for the court and see that there is not a case. That does not make the papers any less real.

2. The 21-day clock

After service in a Minnesota state case, you generally have 21 days to “serve” a written answer on Channel Partners or its lawyers. If the suit is in federal court instead, you have twenty-one days from date of service to serve your answer. Under either, if you miss the deadline, you are in danger of a default. The clock (and its due date) do not change just because you did not read the papers. In Minnesota a lawsuit starts when the papers are served. The point here is that you may see nothing wrong with waiting for a case number or actual court docket. This delay, though, takes weeks of time off the clock and can quickly end in a default.

3. The company needs a lawyer

Your corporation must be represented by a licensed attorney in district court, even if you are its officer, director or shareholder. You should know this before you pay your first filing fee. Filing your first paper will cost a $310 base filing fee in Minnesota district court plus any county law library fee. If you cannot pay the filing fee, you can ask the court to reduce it or waive it.

4. Silence means default

In Minnesota, on a money-only contract claim, when you do not answer, Channel Partners will ask the court to enter a judgment. It cannot be for more than what the Complaint demanded. The judge doesn’t need to get involved. Channel Partners’ lawyers only need to file an affidavit of the amount due. The court administrator must enter judgment against you for that amount plus costs. Take one federal case. The business owner never showed up and Channel Partners asked for a $124,428.73 default judgment on his personal guaranty. The court entered it.

5. The usury defense

If you do answer and argue usury, look at an April 2026 New York appeals case, Spin Capital v. Bridgelink. Here, the funder bought $7.5 million of future receivables for $5 million. Two owners signed a personal guaranty. They paid $210,000, then the ACH debits bounced for insufficient funds and a closed account. Spin sued. The defendant argued that the deal was a criminally usurious loan. They lost. The court will look at the substance over the form. The test comes down to one question: is the merchant bound to pay the deal back, absolutely, under all circumstances? To answer that question, courts generally weigh three things. Is there a reconciliation provision? Is there a finite term? Is there recourse in the merchant’s bankruptcy? The court looked at the agreement itself. Payments to the funder rose and fell along with the business’s receipts, so it had no definite term. There was no clause for bankruptcy to trigger default, so the arrangement was a sale of receivables, not a loan. The guarantors lost too. The court upheld the $8,234,160.50 judgment. There is another legal lesson here. A usurious transaction must be an unlawful loan. If there is no loan in the contract, there can be no usury in it. However unconscionable the contract may be, it does not matter under the law. Their other counterclaims, including one under the federal racketeering law known as RICO, were thrown out by the court, too.

6. Collection can start early

In Minnesota a creditor can start garnishing a debtor in default even before judgment, any time 20 days after the debtor gets a Notice of Intent to Garnish. In Minnesota a bank served with a Writ of Execution must hold your deposits up to 110 percent of what remains on the judgment. If no exemption claim comes in within 14 days, it sends your nonexempt funds to the sheriff, not the creditor. That means the bank can actually hold more than what you owe. As for the 14 days, that is your one window to say that the money is exempt.

Under Minnesota law, an earnings garnishment for a nondomestic-support debt can only reach 25 percent of your disposable earnings. For lower-earners, it is less. You must be served a notice at least ten days before the creditor serves the summons on your employer.

7. The judgment lingers

Your judgment lingers for a long time. In Minnesota, a judgment over $50,000 can earn 10 percent interest a year until paid. The judgment is enforceable any time within 10 years after entry. So you cannot simply wait out the judgment. There is one thing that halts all of it. The moment your bankruptcy petition is filed, the automatic stay will stop the pending lawsuit, and the judgment creditor can take no enforcement action against anyone who is a debtor in the bankruptcy petition.

What Should You Do Right Away

Count 21 days from the day you were served. Get the company a lawyer before that. Read the agreement to see if it shows a reconciliation clause, a set term, and a bankruptcy default. Ask yourself whether bankruptcy would make sense.

You cannot ignore this. Treat every document from Channel Partners as potentially real. Answer every lawsuit within time.

A free contract review costs nothing and takes a day or two. Call (888) 837-7053, or send the agreements to Delancey Street for a straight read on your options.