Sued by Biz Fund LLC? 7 Steps to Take in the First 20 Days

If Biz Fund LLC has served your business with a summons and complaint, the first thing to know is that you do not have much time to respond. The most important thing you can do is act immediately. A common mistake is burying your head in the sand, avoiding calls, and failing to respond to your lawsuit. In short, this is a really bad idea. If you fail to respond to a lawsuit within a certain time, the court can award the company a default judgment.

1. Keep every page they sent

You will want a record of every single document they sent to you. Be sure to look through the papers to confirm that the document you are reading is actually a legal summons and complaint. These pages will also be useful for any attorney you might consult about the case.

2. Find out who is being sued, and where

A Business Debt Collection Lawsuit can be brought against an LLC, Corporation, or an individual. The papers will also contain the name of the court where the lawsuit was filed, the name of the county where the lawsuit was filed and a docket number. This information is important in determining your response to the lawsuit. Keep an eye out for information about who is being sued. For example, is the name of the entity being sued really your company? Do the names match those of the people who own the business, a previous business, or related businesses?

3. Work out your real deadline

As soon as you identify the court where the lawsuit was filed, you must look up the relevant rules. Different courts have different rules about how long you have to respond. In New York state court, if the summons and complaint are handed to you personally by the server, your “appearance” has to be made within 20 days. If they are served any other way, you have 30 days, starting the day the service process is complete. Although these seem like long periods of time, especially when you are focused on running your business, they will pass quickly if you procrastinate. The one thing that doesn’t stop the clock is a phone call from the funder, or an invitation to discuss a settlement. Talks are good and sometimes save money and stress, but unless the other side agrees to extend the time to appear, you’re just adding risk.

4. Get a lawyer to appear for the business

In New York Supreme Court, if a corporation is sued, you cannot just show up in court as the owner or partner. You have to make an “appearance” through an attorney. A lawyer can help you in identifying the allegations and the legal options available to respond to them. Also make sure that anyone already negotiating with the funder is actually offering to appear for you in court and present a defense on your behalf.

5. Pull together the money trail

If the lawsuit is related to money that was advanced to your business, you need to organize the funding agreements, along with the accounts the funds were deposited into and used for business. You need to be able to put together a complete paper trail that records every dollar that moved through the business bank account. Find any emails, texts, documents, agreements, bills, and any correspondence with the funder.

Make sure you pull together every payment and all credits you have made to the account, and check it against what they say is owed. Be aware of fees and charges that are added along with what was borrowed and make sure the complaint reflects what you believe was advanced and collected, as well as any credits you might have or returned payments. Remember, just because the plaintiff claims it, doesn’t mean it’s true. If your company received what was sold as cash upfront, it might not be a loan. It may have been an advance of payments your business might have received in the future. Those differences matter.

6. Read the notice behind any frozen account

When your money is frozen, or withheld, the first thing to do is get the actual documents and see what they say. The law, the contracts and the relationships matter, and the claims someone’s making might be incorrect, or not legally valid. It’s important to know who froze the account.

There are things your business can do to push back against a freeze, but you have to proceed carefully. A letter from a lawyer, while often helpful, might not be enough to immediately release the funds. Meanwhile, a funding freeze is not a time to open new bank accounts, redirect customer payments to other accounts or sell assets. You want to get good advice from someone who knows what they’re doing.

7. Choose how to respond

Your decision about whether to defend the lawsuit or negotiate and settle it depends on many factors. An answer is your response to the claims against you and the facts alleged in the complaint. A motion to dismiss is a way to get a case ended early, but it’s not the first step you are required to take. It isn’t always possible to win, and answering once doesn’t end deadlines, conferences, new documents or discovery from the other side.

When the company that’s suing sends an offer, the question is whether to take the deal. That depends on your defenses, your cash flow, whether there are other debts owed and whether you have money for other creditors. The important thing to remember, is that a lower payment can still leave a big balance, and if your business is struggling, you may not be able to afford the lower payment. It’s important to get something in writing, and talk to a lawyer before signing anything.

A written deal should say the total amount to be paid, over how much time, and what happens if the payments are late. It should cover what entities and individuals are being released, so both sides are clear who’s out and who’s not. It should make clear whether any personal guarantees are released by the deal. If there are promises to discontinue lawsuits after payment, it should explain how and when that will happen. You want this in place, in writing, before you send any money.

If the deadline to respond already passed without you doing anything, the plaintiff may have obtained a default judgment against you. If that’s the case, what’s crucial is to get that paperwork and act quickly. In New York, if the judgment and notice of entry were properly served on you, then a motion to vacate for excusable default must come within 1 year after being served. There is no guarantee you can get a default judgment vacated, and you need a good reason, but, the sooner you get to court, the better. The one thing not to do is assume there’s nothing you can do at all.

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.