Credibly Lawsuit: 6 Ways These Cases Usually End

Maybe this is the first debt lawsuit you’ve received, and you need to know what’s going to happen next. Will you be able to defend the case and avoid judgment? Do these cases usually settle? Understanding how these lawsuits usually end, and what could happen after a Credibly legal threat, can help you decide how to handle the debt.

Credibly suits end up one of six ways. You get a default judgment against you, you negotiate a settlement, you defend and win or lose at trial, the case gets dismissed, you set the judgment aside, or you file bankruptcy.

1. Default judgment

If you don’t respond to the suit with an Answer, the court can enter a default judgment against you. Credibly can then use this judgment to try to collect money from you. In a Tulsa County, Oklahoma case in November 2022, Credibly got a default judgment for $97,816.14 plus costs, fees and interest against both the business and its owner.

You need to respond to the suit before the deadline for answering in the state where it was filed. In New York, for instance, you have 20 days if the process server handed the papers to you in person inside the state; or 30 days after service was complete if it happened in another way. Trying to negotiate with the company after the court case is filed does not extend this deadline. If the claim is for payment on an instrument for money only, the lender can serve a motion for summary judgment instead of a complaint in New York. The court can’t enter a default judgment before the hearing date for that motion.

Save the summons, complaint, and envelopes for proof of when and how you were served. Note the name of the plaintiff (often Retail Capital LLC d/b/a Credibly), the name of every person or business the case lists as a defendant, the court, the case number, and your own notes on how and when the papers were delivered to you. Look for copies of the merchant funding agreement, personal guarantee, repayment history, and bank statements for payments you made.

2. A negotiated settlement

You can offer to settle the debt even after you get sued, but this does not stop the case moving ahead in court. You’ll need to give an Answer in addition to settlement negotiations. Like any negotiation, you and Credibly need to reach agreement on an amount you will pay, and the timing and form of payment. It’s a good idea to get any deal you make in writing.

Before you sign a settlement with Credibly, check to see what it says about: all the businesses, owners and guarantors it will release and all the debts it includes; the total amount you will pay and the dates of each payment; who will end the lawsuit and how they will do it; and what happens if you miss a payment. Even if your settlement payment is lower, the balance due could still be high.

3. A defended case

You can Answer the debt lawsuit and fight it in court. Credibly has to provide evidence to prove the debt, and you can present your own evidence and arguments.

Line up the funder’s statement against your own records. Compare what was advanced, collected and credited for each period. Check whether you asked for a reconciliation when revenue fell and how the funder answered.

You might assume usury will help you out. New York law keeps a corporation from bringing up usury except when the interest rate is above 25% a year. A motion to dismiss is only a way to get rid of the suit, not a guarantee of victory.

If you are named individually, dig out the personal guarantee and what supposedly triggered it. Your situation and the business’s situation need to be looked at separately.

4. Dismissal

A court can dismiss a case in some circumstances. You might be able to ask for dismissal because Credibly did not follow procedure. For example, the summons and complaint might not have been served on you the way the law says they must be. Your being in another state is not enough on its own. To sue in New York, contract suits generally have to start within six years. If the funder does not seek a default judgment within one year after you miss the deadline to respond, the case gets dismissed as abandoned unless there is sufficient cause shown by Credibly.

5. Judgment set aside

Even if you do not Answer and the court enters judgment against you, you still have the opportunity to try to set it aside. This usually means going back to the court and showing you had a defense to the suit and a good reason for not answering. The judge gets to say what happens then.

Late moves can also cause problems. New York courts ask for a motion to vacate for excusable default to be made within one year of service of the judgment and notice of entry. And since August 30, 2019, New York confessions of judgment need to name a New York county as your residence, keeping them from being used against out-of-state owners and businesses without places of business in the state. A challenge to a judgment is not a guarantee you’ll win.

If a bank account is frozen or a customer gets a payment demand, ask for the actual document. A UCC filing, a notice to customers, and a court restraining notice aren’t the same thing, and hiring a lawyer doesn’t automatically release funds on its own. Get guidance before moving bank accounts.

6. A bankruptcy filing

If you decide you need protection from business debts, you can file a bankruptcy petition. This will give you a stay against further court proceedings. Keep in mind that bankruptcy protection covers claims that came up before you filed, and don’t rely on the federal Fair Debt Collection Practices Act for relief; it covers only personal, family or household debts, not business debts.

If a third party is negotiating for you, make sure a lawyer actually agrees to handle the case. And a deal with one funder doesn’t cover your other advances.

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.