Clearfund Solutions LLC Litigation: 5 Reasons Default Judgment Is the Real Risk

If Clearfund Solutions LLC has sued your business, the real risk in a commercial debt lawsuit is not the damage claim. The biggest danger to your business, and the one that you have time to address, is a default judgment. That is a money award against you that you did not fight. It is in the lender’s hands from then on - if they want to collect from you, it is their move and they can make it when it suits them.

1. The clock starts at service

In a lawsuit like this, the clock starts ticking the moment you are served. The lawsuit is served and your business has 20 days, if served in person, to get an Answer back to the court. Served another way, the count could be 30 days after service is complete. It is sometimes quite tricky to figure out when something was served, and even trickier to figure out what day counts in the count. But if the lawsuit has been served properly, it will go forward even if the lawsuit papers were accidentally thrown away. In most courts, a lawsuit against a corporation must be defended by a licensed lawyer. If the 20 or 30 days go by and there is no Answer, Clearfund Solutions LLC files and it gets its default. You have no input, and the result comes from a resolution that does not have you participating in it.

2. Your defenses disappear

If you don’t fight back in a debt collection lawsuit, you lose your defenses. Your defenses are the facts that might have kept you or your company from owing this debt. The default means that there is nothing to even consider in court - the default means Clearfund Solutions LLC wins. Once that happens, you can’t say it wasn’t your debt, or that it was paid off. It was not heard, but the process worked without you, and you lost. Whatever the complaint says is automatically considered admitted as true in a default. It is now an uncontested fact and you may not go back on it.

In one Clearfund Solutions case, Clearfund sued over a merchant cash advance, and the defendants did not put in an Answer. They dropped their improper-service argument on appeal, and a New York appeals court upheld a victory for the lender.

3. No judge needed

Even more fundamentally, the plaintiff does not need a judge to get a default judgment when the claim is for a fixed amount. It is the clerk’s job to see that the timeline ran its course. Because you did not fight the claim, there is no chance that a judge would listen to evidence or arguments on your behalf. That judgment is the full demand, plus the interest allowed by law, and the costs of suing you. Once Clearfund gets its judgment, it begins charging the ongoing New York interest rate of 9% per year. This added debt cuts into an already reduced cash flow.

4. Collection starts fast

Once Clearfund Solutions LLC has a judgment, it doesn’t have to wait on an appeal or any other decision to start collecting from you. It can register the judgment as a lien on property that you own. This creates a local judgment lien against all real estate you have at present, and that you will have for ten years. If there is money in an account Clearfund can freeze it fast, for up to a year. Those debts do not simply go away, and Clearfund can stop payment of money owed to your business and haul away your property. It can ask your business officers to answer questions under oath to locate assets. Worse, the freezing of a bank account or garnishment of a payment to your business can create an even greater hardship for your company, setting in motion a series of events that may be the start of the end of your business.

5. Undoing it is hard

It is hard to undo a judgment. And while a default judgment may be vacated or set aside, it’s a greater headache, often time sensitive, and not always guaranteed. You would likely have the burden of showing that you would have a good reason to defend against this lawsuit, and as well you have to show that you had a good reason for not defending in the first place. Normally, your business has a year to ask for that relief. You may have grounds to overturn it, like when they failed to serve the lawsuit properly.

Finding the Right Attorney

If you have been avoiding or ignoring your lawsuit, this is not the point to continue that approach. Finding the right attorney and starting right away is crucial. Time in a lawsuit like this is a valuable resource, so don’t wait to get an opinion about your situation. Get the contract, your account statements, other paperwork, and receipts for payments in order and have your lawyer review them promptly to make your case against the lender. That is how you avoid having a default judgment ruin your company.

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.