Elevate Funding Litigation: 5 Reasons Default Judgment Is the Real Risk

If Elevate Funding sues your business, the lawsuit itself is not so bad. What sinks a business is a missed deadline that turns a lawsuit into an uncontested judgment. Then the court rules without hearing your side, and the judgment is costly to undo. Let’s examine five important reasons why you must make responding a priority.

1. The clock is short

Ignore court papers from Elevate Funding at your peril. The start of a lawsuit, a summons and complaint, automatically includes a time limit. How much time do you have to act? Each state has its own rules. In New York it’s 20 days to appear if you get the summons and complaint in hand, or 30 days after service is complete if the summons went to someone else or to the Secretary of State. Don’t think that calling the funder, applying for financing, or ongoing settlement talks will extend the deadline. You need to review the summons and complaint on day one to see how much time you have. Even if the lawsuit has flaws or you think the summons was defective, act promptly. You can lose your chance to object if you do not file your papers in time.

2. No judge needed

It’s a myth that it takes a judge to make a ruling. If you do not answer the complaint and dispute the debt, the company can ask the court for a default judgment. In New York, if you don’t respond to a claim for a fixed amount, the plaintiff can get a judgment from the court clerk for that sum plus costs and interest. No judge hears anything, and no judge signs anything. When a corporation is served through the Secretary of State, the plaintiff must mail the summons to its last known address at least 20 days before getting a default judgment.

Answering the court papers keeps your options open. You can file an answer and defenses, a motion, gather records through discovery, or negotiate from a more balanced position. A default loses you all of that.

3. Your bank account freezes

One big impact of not answering the summons and complaint is a restraining notice on your bank, which can grab funds up to twice the amount of the judgment. That includes funds you deposit after the restraining notice arrives. After the sheriff serves a bank with a judgment debtor’s execution, the hold stays in place 90 days unless the bank hands over the funds or the court extends the time. Also, the judgment interest rate in New York is 9 percent a year, and can add up over time. When a bank account freezes, get the paperwork that backs it up and get advice on whether to move receipts, deposits or other funds.

4. It follows you for years

A money judgment is presumed paid off in New York only after 20 years; the clock starts over after any partial payment or written acknowledgment. In New York, a docketed judgment becomes a lien on real property you own in that county for 10 years. If you sign a personal guarantee, you may find that both you and the business face the default judgment, so review the guarantee’s terms.

5. Undoing it is harder

One option is to file a motion to vacate the default judgment, but be prepared with a good reason for why the court should undo it. In New York your motion to vacate a default judgment for excusable default must be made within one year after you are served with the judgment and the notice of entry, although this time limit does not apply when you are claiming the court had no jurisdiction, there was misconduct by the other side, or fraud in the case. If you learned of a default judgment late because you were not personally served, New York law allows you to request permission to defend the case up to a year after you learned of the judgment, but no more than five years after the judgment entered. You must show that you have a valid defense to the case. A challenge does not by itself stop collection or undo the judgment. Get a lawyer to look at the entire court record, and promptly. Also beware of a confession of judgment you sign. Since August 30, 2019 New York has allowed them only against a person living there or a business with a place of business there.

Save the summons, complaint and any other papers, envelopes and emails about the case. Write down when and how the papers arrived and who got them. Find any agreement, guarantee and payment history. If you reach a settlement, make sure it is in writing and includes how the lawsuit ends, which owners and guarantees are being released, the total amount of payments, and the terms of payments including what happens when a payment is late.

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.