Sued by Delta Bridge Funding: 7 Things That Happen Next

If you’re facing a lawsuit from Delta Bridge Funding (Cloudfund) over an MCA, act quickly. A lawyer will scrutinize the agreement and balance and can negotiate a settlement in writing. Ignoring it can lead to a default judgment and frozen accounts.

1. The clock starts

The summons begins the court process. In order to participate in the court case, you must serve and file your answer or other response within strict deadlines. The deadline depends on the court, the kind of case, and how the papers were served on you. For example, in New York state civil courts, your deadline is 20 days after the summons was handed to you in the state of New York, or 30 days if it was served in a different way. If you are talking to the funder’s representative or working on a settlement, it does not stop the clock.

2. You need a lawyer

In New York, if you are a corporation, you generally cannot represent yourself in court. Some small claims courts may make exceptions. If you engage a broker for negotiating a settlement, confirm that it will be getting an attorney to appear in court. The documents from the court and funder are also important. Put the summons and complaint, exhibits, and envelopes where you can find them. List any other papers you’ve received from the court or funder. Confirm that the complaint is addressed to your business and any other defendants, such as you individually. A lawyer will look through all of this for you and any other defendants.

3. The claim gets tested

The complaint may show a balance due. The lawyer will check how the balance was calculated, especially the charge amounts. It’s important to gather any requests for reconciliations and the funder’s responses.

Calling an agreement a loan or an advance does not control what it is. New York courts look at any reconciliation, whether the deal goes to a fixed end date, and what happens if the merchant goes bankrupt. Corporations generally cannot invoke the usury laws except for criminal usury, that is, charges over 25% a year, if knowingly charged by the lender.

On that question, the New York Attorney General sued Delta Bridge and Yellowstone Capital in March 2024. The lawsuit says Delta Bridge took over Yellowstone’s business in May 2021. Yellowstone settled, and the settlement canceled about $534 million in merchants’ debts. That deal did not cover Delta Bridge advances. The Attorney General has not settled with Delta Bridge, and a court rejected its motion to dismiss the lawsuit. As of April 2026 no court has ruled on whether these merchant agreements are illegal loans.

If you were personally named, it’s time to check the personal guarantee and what conduct supposedly triggered it. A guarantee of performance is different from an unconditional payment guarantee. The business and the owner have different legal positions, and may need different lawyers. Being outside New York does not by itself justify dismissal. The forum, governing law and arbitration clauses need to be checked.

Depending on the facts of your case, your lawyer may serve an answer with supported defenses, make a motion, request records in discovery, oppose a request for judgment, and/or negotiate. A motion to dismiss is one of many tools, not a required first step or a promise of easy success. After that, discovery, conferences and deadlines may keep going. Give your lawyer accurate records and timely updates, including payments and new notices.

4. If you do not answer

A missed deadline can lead to a default judgment. In New York, for a fixed-sum claim such as a balance, the funder can ask the clerk to grant judgment within one year of your default. To undo the judgment, you need to move to vacate it within one year after you were served with a copy of the judgment and a notice of entry of judgment. You need to give the court a good reason for missing the deadline, and must be able to show the court you have a potentially valid defense. This is only a possibility, not a guarantee.

5. A confession of judgment

Some agreements come with a signed paper allowing the funder to skip a lawsuit and get judgment without a trial. In New York, it has to be filed within 3 years after signing, and usually cannot be filed anywhere but the county named as your residence or the county you live in now. These kind of judgments generally cannot be used against a business that does not have a place of business in New York. An attorney can check if the signed papers and the court record follow the law. Not every judgment is unchallengeable.

6. Collection begins

Under New York rules a judgment leads to a restraining notice to your bank, letting it freeze money you’ve deposited there and keeping it frozen for one year unless the judgment is paid or vacated. The state’s judgment rate is 9% a year. That can grow to a large amount if it sits unpaid.

A judgment for a money amount is presumed paid after 20 years. Any payment or written acknowledgment of the debt restarts the clock. Proper advice is necessary before changing bank accounts or moving assets.

Funders may also send notices to your customers or card processor and try to get them to send payments elsewhere, even without a court judgment. Watch out for UCC financing statements, assignment notices, subpoenas and court restraints. These are different documents, and require different responses. Get the actual document sent to you or anyone else. Send it to a lawyer as soon as possible. A notice does not make every demand valid. Hiring a lawyer or sending a letter does not automatically release funds.

7. Settlement is possible

A lawsuit can be resolved by negotiation. In figuring out an offer, consider your defenses, what cash you have, and the interests of other creditors. A lower payment can still leave a large balance. The written settlement should cover the total payment amount, how you can make the payments, how any past payments count, which businesses and people and guarantees are released, how the lawsuit is discontinued and judgment satisfied, and releasing restraints on your bank accounts. Get a lawyer to see that UCC financing statements and demands on your customers for payment are canceled. Make sure the settlement spells out what happens if you miss a payment. Be aware that a deal with one funder does not resolve other MCAs.

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.