Irm Capital Filed Suit: 7 Questions to Answer Before You Respond

IRM Capital filed suit? A lawsuit is not necessarily the same as a judgment. When the funder sues, you need to act. First, confirm that it is a real filed suit, and not just a demand letter. Check the funder’s right to sue, the amount and what it covers, if the court has power over you, what the funder alleges your business did, and whether you did it, who the lawsuit names as defendant, whether you also have a judgment. Consider your best response and the value of settlement. All this needs a lawyer. You should find a good one right away.

1. Is it a lawsuit

Demand letters and lawsuits can look the same, but mean different things. A lawsuit is an official document that opens the court file. Demand letters threaten a lawsuit but they do not do it yet. First, keep all the pages, and check that you got everything. A true lawsuit has not just one piece of paper, but at least a summons and the complaint. See if it has exhibits. See if the envelope or email has a date showing when it was sent. Note every defendant, the plaintiff, the court and case number. If it is a lawsuit, do not assume that it is right or that you are going to lose.

2. When is the deadline

The time allowed for the next step in the lawsuit is not just 30 days from when you opened the envelope. It depends on the kind of court, federal or state, and the rules in the state. It also depends on how the papers were served. For example, in New York a response in court in a state case is generally due 20 days after service, or 30 days if the summons was left with another person, or posted on the door and mailed to you, or if you were served outside the state.

You do not appear in court by a phone call or by taking settlement talks or applying for financing. You appear by serving an answer, a notice of appearance, or a motion. Even if it seems you were not served, do not let the deadline pass without acting.

3. Which court, which law

The plaintiff picks the court. Each court has its own forms, rules and powers. The laws are different in every state, and in federal court. Sued out of state? That court may have power over you, and you still need to act. There may be court rules, contract clauses, and perhaps an arbitration clause that influence where the case is heard. Also find out which law the funder says applies to your case. It is easy to make a mistake about what court has power or what laws apply. This may be hard to decide by yourself. Get help.

4. Is the balance right

The number in the lawsuit is not necessarily right. Check the total amount advanced, the amounts collected, credits, and whether the balance includes any returned debit payments. Compare this to the balance on the complaint. Also confirm who is suing you, and who signed the agreement or the receipts. This may be technical and detailed, so it is best to use a lawyer.

Also, is it a loan? The label does not decide it. A New York court looks at the reconciliation clause, the fixed term, and whether there is recourse if your business goes bankrupt. Courts also look at whether your revenue later dropped, or whether you ever asked for an adjustment to the balance.

In New York, knowingly charging more than 25% a year is criminal usury for an unauthorized lender. Usury defense by a business defendant does not involve a counterclaim for damages. Usury, then, is a shield against the debt, not a sword to claim back the payments.

5. Are you personally named

The papers may sue only the company, or the owner, or both. Find the personal guarantee; what conduct did it name as triggering it. Performance guarantees and payment guarantees are different. If both are named, each has its own interests. The owner may need a separate lawyer.

6. Is there already a judgment

If you have missed a deadline, the suit is not necessarily over. Obtain the court file first. If you are late, you may be able to move to vacate. In New York, such motion, if based on excusable default, must be served within one year after being served with a copy of the judgment and written notice of its entry. There is no automatic right to vacate.

Confession of judgment lets the funder skip the lawsuit and get a judgment. In New York, the funder may file only in the county where the defendant lived when signing or lives now. A business lives where it has a place of business. The confession may not be enforceable in other states.

A frozen bank account, a withheld processor payment, or letters to your customers do not necessarily mean the same thing. Ask to see the actual document. A UCC filing, an assignment notice, and a subpoena do different things, and may be done for different reasons. Even if you get a notice, this is not proof that every demand is valid. Get legal advice before moving accounts or assets.

7. Should you settle

Negotiating a payment plan is not the same as defending the lawsuit. It must fit the company’s cash flow, other creditors, and court schedule. A lower payment, even if affordable for the moment, can add up to a lot by the time it is paid in full. Missing a payment can bring new risks.

A written settlement should state the total balance, the dates and amounts of each payment, and what money was already collected. It should say exactly which entities, people and agreements it covers, and when the releases become effective. If the lawsuit or judgment was against the owner, check the release of personal guarantees. Check any release of restraints, UCC filings, and customer demands. Find out how the case ends: a dismissal, paid judgment, vacated judgment, or others. See what happens if a payment is missed or late, if a notice and chance to cure is given.

Settling with a funder settles nothing about the other funders. Keep a file for each agreement and lawsuit.

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.