Itria Litigation: 5 Reasons Default Judgment Is the Real Risk

If Itria Ventures has sued your business over a merchant cash advance, the real danger is what happens after Itria gets a default judgment. The lawsuit itself might seem scary. To be sure, being sued is never fun. It’s the default judgment you want to avoid at all costs. Once Itria has a default judgment against your business, it has a weapon for collection that will last for years. On top of all that, a default judgment over a merchant cash advance is easier for Itria to get than you may think.

1. The clock is short

Suits over merchant cash advances typically happen in New York state court, and depending on how it was served on your business, you only get 20 to 30 days to show up and respond. The normal period to respond is 20 days if you were served in person, or 30 if it was served on you some other way. The state court is serious business, and the rules for how to show up are very different from small claims. That appearance must be a formal one - the court requires that a lawyer representing the company appear.

And Itria can bring these cases even over relatively modest debts. One case, resolved in the Brooklyn courts, asked for judgment of $14,664.83.

2. Default hands them the case

A default judgment works like this: if you miss that deadline, you have admitted to every fact Itria has alleged. Worse, any defenses you might have had, probably including some that would have allowed your business to win outright, are likely gone.

In an MCA lawsuit, the amount Itria wants is fixed. That means once the court clerk finds the time is up, they can enter a judgment with no trial at all. A clerk’s judgment gives the other side exactly what it wanted, for the full amount demanded, plus court costs and interest charges too. Worst of all, the court makes it without hearing any side of your story.

3. Collection starts almost at once

Once Itria has the judgment, it can send your bank something called a “restraining notice.” That notice will freeze up to twice the judgment in your bank account. That freeze can last up to a year.

That’s only where it starts. Liens will pop up on your real estate, Itria can garnish any bank accounts it finds, and the sheriff can start seizing property outright. A lien on your real estate means you can’t sell or refinance without addressing it. Garnishment can hit not just bank accounts but PayPal, Venmo, brokerage accounts, and almost anything else that happens to be holding your money.

4. The debt grows and lingers

Merchant cash advance default judgments earn 9% interest a year. The lower 2% rate some people talk about is only for consumer debts for individual persons. And the law presumes a business judgment is paid only after 20 years.

The clock gets reset all over again by a payment, no matter how small, or even if your business just acknowledges the debt in writing. That’s why default judgments in New York have an incredibly long shelf-life.

5. Undoing it is uncertain and costly

If it’s within one year of when you got notice of the judgment, you may have a motion to vacate for excusable default. There’s no guarantee it will work, though, and even if it does, it is usually going to get expensive. To be sure, it’s cheaper to take care of an MCA lawsuit first - before that default judgment happens.

Another way to try and have a judgment thrown out is that you never really had any notice the case was happening, and you have a real defense. The time limits on when you can use it are tough. You must move to undo the judgment within one year of finding out about it. If the judgment is more than five years old, it’s almost certainly too late.

If you’ve been served, act now. Write down when you were served, since that sets the deadline to respond. If you have the contract or records, put them together - you might need them. Finding a good lawyer to handle this lawsuit needs to be next up. It is still possible to settle the suit, especially if there are defenses or good arguments over what the amount should be.

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.