A Graydon Lawsuit: 6 Ways These Cases Usually End

When a lender sues on a business loan and includes your personal guaranty, the case tends to end in a default judgment, a cognovit judgment, dismissal of the personal claim, a contested judgment and collection, bankruptcy, or a settlement, and which of those you get depends far more on why you were named than on what the lender does. If you are named in a Graydon case, you need to assess your situation individually.

1. Ignoring the deadline

If you were a named defendant you must file an answer; you have 28 days in Ohio state court after you were served. Answering the complaint on the business’s behalf is a nice thing to do, but it does not keep you from having to file an answer on your own behalf. If you are late with it the lender can get a default judgment against you individually.

Ohio Civil Rule 60(B) is the procedure for getting a default vacated if you can show: (1) mistake, inadvertence, surprise or excusable neglect; (2) that you have filed for it within one year of the judgment; (3) that you have a meritorious defense; (4) and that you can move to set aside the judgment within a reasonable time. If any one is missing, the motion fails.

2. A cognovit judgment

Some business loan paperwork includes a confession of judgment clause. Ohio’s version of a confession of judgment is the cognovit warrant. It lets the lender simply file the paperwork and have the court enter judgment against you, with no notice and no hearing. But, such a clause has to be paired with a prominent warning next to the signature lines, or the warrant is void. A lender can’t get a cognovit judgment against you unless your papers are written that way, so pull your signed loan papers and look.

3. The personal claim fails

While it is true that owning and running the business does not by itself make you liable to creditors, creditors know that and don’t rely on it. The personal claim will usually be based on a personal guaranty you signed, or on the way you signed for the loan on the business’s behalf. Read it carefully and compare your understanding of the facts with the words of the guaranty, to see whether the lender can collect from you or not. Is it just for the loan, or for all business debts?

Also have your lawyer check: Did you sign in your personal name, or with your business title? Is it for this particular debt? Did you revoke the guaranty the way it requires? Were you induced by false statements? Is the amount right?

Results turn on the facts, the language, and the timing. Did the lender file the case on time? Most written contract claims in Ohio must be filed within six years of the claim accruing, though the statute lists several exceptions.

4. Judgment, then collection

If the lender’s case succeeds, the Court will enter a judgment. An Ohio judgment entered in 2026 bears interest at 7% a year if the contract does not set a different rate.

Before garnishing wages in Ohio, a lender must first send you a written demand for payment. By law, they must wait 15 days before asking the court for the order, but not more than 45 days.

A judgment is dormant unless it is renewed. In Ohio, dormancy happens unless it gets renewed by an execution, garnishment, or certificate of judgment within five years of entry of the judgment or last renewal.

After you are sued, moving assets around can make settling harder, can get you sued again, and a transfer can be evidence of intent to hinder, delay, or defraud a creditor.

5. Bankruptcy

A company’s bankruptcy filing imposes an automatic stay, but that only covers the company, not the guaranty. If the company files bankruptcy, the case proceeds only against you. If you are a guarantor, the discharge the borrower gets in bankruptcy does not, by itself, reach you.

You can file too, if you need bankruptcy relief. Filing a bankruptcy prevents the creditor from pursuing collection of debts from before the bankruptcy was filed, and this can be very useful. A small business can use Subchapter V only if it owes no more than $3,424,000.

6. A negotiated settlement

You will sometimes be able to settle for less than the full amount. Settlement of a business claim can be very good, but you should not assume that resolving it ends your personal risk. Is there a personal guaranty? If there is one, does the written settlement resolve that? Your settlement may have been for less than the full amount, but your guaranty will remain in place unless the settlement resolves it.

A creditor that also holds the business debt can see value in settling while the account is still open. The guaranty claim may settle for less, especially if much of your property is protected. Negotiating the amount and the time to pay is a good use of your time and money. Keep in mind that when a lender cancels $600 or more of debt it must file Form 1099-C with the IRS.

Not all of these possibilities will fit every business loan. The only way to know is to study the facts of your situation, and decide what works for you.

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.