Sued by Expansion Capital: 7 Things That Happen Next

Once Expansion Capital sues you, you will be served with a summons and complaint. A summons notifies a person (your company) that it is being sued, while a complaint is a court document that sets out the alleged basis for the lawsuit. The summons gives you a deadline to file a response in court. Your response must answer the allegations in the complaint and it must be in the correct format for the court where your case is located. If you do not file a response, the court may enter a default against your business which can later be used to pursue your business’s assets and income. If you do file a response, you will need to appear at future court conferences. If you get sued, do not ignore the lawsuit.

1. Confirm it is a lawsuit

This may sound obvious, but not all legal notices are lawsuits. Collection attorneys send demand letters. If you received a Summons and Complaint from a court, then it is a lawsuit. Make sure you read the document carefully, including the caption which tells you the plaintiff and defendant’s names, and the court’s location and file number.

Next, save it all. Each piece of the lawsuit has a purpose, and what seems trivial now could have importance later. Whenever you receive paperwork - in the mail, via email, in person - write down the date it arrived and how (and from whom, if there is a person involved). You’ll need this info to respond later. Then, gather up all the documents about the Merchant Cash Advance contract and your business. There should be some sort of agreement. There may also be a guarantee. You’ll also need statements that show what the balance was, what payments were made, and, if the Merchant Cash Advance company took a percentage of your credit card sales, what those transactions look like.

2. Find your answer deadline

Your answer is due in the court listed in the Summons and Complaint within the time period listed. You may have more or less time, depending on your state’s rules or the method in which the Summons and Complaint was sent to you.

You have either 21 days after service to respond to a lawsuit in federal court or 60 days, counted from the request date, if you sign a waiver of service. If you are sued in a South Dakota state court, you have 30 days after service, not counting the day of service. Don’t miss the deadline for a response in your Merchant Cash Advance lawsuit, even if you plan to work out a settlement with the Merchant Cash Advance company or their attorney.

3. Miss it, and default follows

If you are a defendant in a lawsuit, and the deadline to answer the Complaint or Summons has passed, you’re what is called “in default.” When a defendant is in default, the court can enter a default judgment against them for the amount the plaintiff is seeking.

Even if your Merchant Cash Advance lawsuit has already gone to a default judgment, it may not be too late. Get a copy of the court record and review it quickly. Every court has different procedures. However, the court may be willing to grant relief from the judgment if there was an issue with service or if you have a good reason for why you missed the deadline. And you will have to act, and act fast.

4. A lawyer reviews your defenses

The defenses that are available depend on your state, the case’s facts and circumstances, the contracts, and applicable law. In addition to reviewing the facts of your Merchant Cash Advance contract, a lawyer will review your records of payments made, emails, and any other document that may have relevance. They will also compare the lawsuit with the facts. For example, did you sign a personal guarantee? Is the amount sought by the plaintiff correct?

You need to review the contract for language that labels the deal as one type or another, check if you asked for or received a reconciliation when your sales fell, look at whether the payments tracked your actual revenue, and consider if the term “loan” was used in your agreement. There is no one factor that decides the issue.

A lawyer will review how you were served with the lawsuit, whether the court has proper jurisdiction to hear the case, whether there is a governing law and venue clause in the contract and, if so, what it says, whether there is an arbitration clause, and whether there were any arbitration proceedings. You cannot get the suit dismissed simply because you live in another state. If you lose an arbitration proceeding, the funder has one year to ask a court to confirm the arbitration award. A court must confirm the award unless it vacates or corrects it.

5. Your guarantee puts you in it

If you signed a personal guarantee for your business’ Merchant Cash Advance, it could give a plaintiff the option to sue you individually as well. Whether they can obtain a judgment against you personally, or whether you can be held liable, depends on how the court views your Merchant Cash Advance as well as the validity of the personal guarantee.

Make sure you have a copy of the guarantee you signed. Understand what you agreed to and what triggers the funder to call you on it. Guaranteeing that a business will act in certain ways may be different from guaranteeing that they will pay the Merchant Cash Advance. Depending on how the guarantee is worded, your interests and those of your business might differ.

If you are held personally liable, wage garnishment could follow. Federal law places a cap on garnishments at the lesser of 25 percent of your weekly disposable pay or the amount by which your income exceeds 30 times the minimum wage, as of the week the garnishment is to take place. As the owner, there is no such protection for your business bank accounts.

6. Collection can reach your accounts

You’ve heard the stories: frozen bank accounts, processor payments held, and, in the worst cases, letters to your customers telling them they need to pay the funder. Ask for and get the actual document. A UCC filing, assignment notice, court restraining order, and subpoena are different things, each with their own meaning and requirements. Just because there is a notice of a UCC filing, it doesn’t mean that the funder is entitled to the property they say is collateral.

Don’t empty your accounts. Don’t rush to close and transfer accounts to another bank. Before you make any drastic moves, ask an attorney about the likely effects. Hiring a lawyer alone does not unfreeze your assets. A judgment lien can follow you for years. In South Dakota, a docketed judgment is a lien on non-homestead real estate in that county for 10 years, renewable.

7. Settle, or seek bankruptcy protection

If your goal is to resolve this lawsuit, there are settlement options. A work out could mean monthly payments, a lump sum, or other provisions. Each case is different. A lawyer may be able to negotiate to have the lawsuit discontinued in return for a payment. Make sure you have a clear idea of what you can handle. Consider all of your business obligations and income. If you want to settle, try to get it in writing before you pay.

Written out as completely as possible, the deal should include: the total amount, how the payments are to be made, and the effect that missing a payment will have, whether on that payment alone or the entire settlement. Also consider who and which claim is included, what releases are to be given, what happens to personal guarantees, whether the case will be dismissed, and any release of restraints or notice that UCC filings have been removed. Keep in mind that a payment plan on one Merchant Cash Advance case may not resolve other MCA deals you have.

When negotiating doesn’t work, your business could file for bankruptcy. Bankruptcy automatically stays collection actions and court cases against the debtor. Small businesses may qualify for Subchapter V bankruptcy with debt limits that can change from time to time. These are currently at about $3.4 million as of October 2026.

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.