Kings Cash Group Litigation: 5 Reasons Default Judgment Is the Real Risk

You get a call: someone like Kings Cash Group is suing you because you defaulted on a merchant cash advance. The lawsuit itself isn’t the main danger; the default judgment is. The default judgment kicks in when you don’t answer in court on time. It gives the merchant cash advance company the right to enforce its numbers, which can mean freezing your bank accounts.

1. No answer, no trial

When the “plaintiff” (the one suing you, in this case, a merchant cash advance company like Kings Cash Group) “serves” you, that means you get a notice, a “summons,” of a lawsuit against you. The summons gives you instructions on how to “answer” the suit. Usually, you have to file legal paperwork, called an “answer,” in court, and send it to the plaintiff by a certain deadline. If you don’t file your answer in time, you’ll be “in default,” which means the plaintiff automatically wins the case. The court enters a default judgment against you for the amount the plaintiff asked for.

If you are sued in New York over a merchant cash advance, you will have to act fast. The New York statute allows a 20-day time limit to show up if you are personally served or 30 days if served another way. If you don’t go to court on time, you will not even get a trial. The clerk of court can give the merchant cash advance company the amount it claims, plus costs and interest.

You can miss those crucial days for innocent reasons. The papers go to the wrong address, or to the old registered agent. They get buried in a blizzard of the past-due notices that come with the territory. The papers look like just another collection letter and get pitched.

2. Their number, untested

When it comes to getting a judgment, the numbers the merchant cash advance company presents are the only numbers the court considers. Of course, the merchant cash advance company’s numbers are not your numbers. Since you have never made your case, all the merchant cash advance company’s claims go unchallenged.

When a merchant cash advance company gets a default judgment, they hit the jackpot. The company usually gets its fees, its legal costs, and its full accelerated balance. The amount the merchant cash advance company claims is only its “version” of your debt. It may not be what you owe, or even what you could have owed, if only you were at court to defend your claim. In New York, judgment interest is 9% a year. The interest piles on every day, for years.

3. Your bank account freezes

A restraining notice is an order that hits your bank. It blocks you out of your business bank account. In New York, the amount blocked can be twice the judgment amount, and the restraint order can last a year. Money for any use, including rent, utilities, taxes, and payroll, can be frozen. If you signed a personal guaranty, the merchant cash advance company can make your personal accounts off-limits, too.

After a freeze, the merchant cash advance funder, armed with a judgment, can take funds from an account. The funder can do it through the sheriff, or through a court officer, called a marshal. An officer of the court can also get a writ to reach other assets. After the judgment, the merchant cash advance funder can pull you in to explain account balances and receivables under oath.

4. Leverage moves to them

With a judgment in hand, a merchant cash advance company has extra leverage. Settling a debt is hard enough; once there is a judgment, it can be even harder. A merchant cash advance company may cut a deal early in a suit; the risk of losing, especially in court, is enough leverage for the borrower. After a judgment, though, the risk drops and the leverage flips. Merchant cash advance companies can be stingy. They might settle, but usually not for much off the judgment amount. In New York, a judgment is presumed paid after 20 years, but any partial payment or written admission starts the clock over.

An MCA funder with a judgment can lose it, too. Getting a default judgment vacated brings a suit to square one, and can mean finally getting leverage to fight the “numbers” the funder claimed in the suit. Without a judgment, the company’s position is more uncertain, and they’re more likely to be open to talks.

5. The clock to undo it

You can sometimes undo an MCA default judgment. The grounds are technical: the summons was not served right, the court did not have jurisdiction to hear the suit, or there was “excusable neglect,” plus a good chance of winning the case if the default is undone. Or the case can reopen because of “fraud” by the merchant cash advance company or by trickery to keep you from getting to court.

Reopening the MCA case does not make it disappear. The merchant cash advance company can still make its case. You can then raise defenses like the merchant cash advance was a disguised loan, its fees were usurious, or the merchant cash advance company refused a reconciliation of the balance or inflated the balance. The defenses that fit depend on the case.

As for the clock, in New York, it’s one year from when you were served with the judgment and notice of entry to undo a default for “excusable default.” For “fraud” or “lack of jurisdiction” over the case, there is no set time limit, but the longer the delay, the harder it is to make your case.

If you want to challenge the default judgment, it will take some quick work. Pull the court docket, order proof of service, check the dates against what happened, get the paperwork you signed, ask your bank what’s been served, calendar deadlines, and never negotiate with a merchant cash advance company without a merchant cash advance attorney at your side. MCA company default judgments can happen to even the most careful business owners, and getting to the legal details soon is crucial.

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.