Lyfe Advance Litigation: 5 Reasons Default Judgment Is the Real Risk

If you have been sued by Lyfe Advance - or anyone else for that matter - defending the complaint is critical. A default judgment can happen when you ignore the lawsuit. Unfortunately, ignoring it won’t make it go away. It will just give the plaintiff the ability to automatically win. If you don’t properly respond to the Complaint that you receive from the court, the court can declare you the loser. And it can do so even if you have a solid defense to the lawsuit.

1. Everything is admitted

Anything in the Complaint can be considered automatically true if you fail to answer the Complaint. Even if it is blatantly false. That means that the company doesn’t have to prove that you owed the money. They don’t have to prove anything. The court will just assume that everything they say is true.

And in a “sum certain” case, the court clerk can handle the default judgment. The Complaint will ask for an exact dollar amount, based on the contract. The clerk doesn’t need any special instructions from a judge to enter the default. And the plaintiff must request the clerk to enter a judgment within one year of the default date.

2. The clock is short

A default can happen sooner than you think. The court will typically give you only 20 or 30 days to answer the complaint. If you are in New York, you must appear within 20 days after you are served. This means serving an answer, making a motion, or serving a notice of appearance. The time changes if the summons was left with someone else at your home or at a place of business, or if you were served through the Secretary of State. In these cases, you have 30 days to respond.

The plaintiff must first mail the summons to a personal guarantor in an envelope marked “personal and confidential”. This mailing must be made at least 20 days before the entry of a default judgment. If the company was served through the Secretary of State, a similar mailing rule applies to the company’s last known address also.

You may think you can still work it out. But the funder has hired a lawyer, who has already paid court costs, generated and filed papers, and gotten you served. The time for bluffing is over, at least for now. Do not ignore the lawsuit. Do not throw it in the trash. Do not pretend it didn’t happen.

3. Collection starts fast

Debt collection can begin immediately. The plaintiff can ask for a levy on your bank account. That means that your account, except legally protected amounts, will be frozen. Your bank account can be restrained up to one year, or until the judgment is paid or vacated. And any money in there is at risk of being taken.

They may also ask for information about your assets and income. The plaintiff may send sworn interrogatories to anyone holding money that belongs to you: the bank, PayPal, Venmo, tenants; and anyplace else. And if it’s equipment they’re after, the sheriff may show up and seize it - equipment, vehicles, and even your interest in your own company. If you own real property in the county where the judgment is docketed, the judgment is also a lien against it for ten years.

4. It grows and lasts

If a judgment is entered against you, that judgment can grow. In New York, a business debt judgment will earn 9% interest a year. You are required to pay it in addition to the original amount. It is presumed to be paid only after 20 years. And the clock restarts with any partial payment or levy.

A judgment can affect your credit score. If you have a judgment lien on property, this can be a deal-breaker for lenders and title companies. You may not be able to sell, buy or refinance property without dealing with the lien.

5. Undoing it is hard

Once a default judgment is entered against you, getting rid of it is tough. It takes time. And it takes money. Answering the lawsuit - and actually defending yourself - is much easier and cheaper than trying to fix things after the fact.

Two common grounds to vacate a judgment are excusable default and improper service. Excusable default requires a reasonable excuse for the default and a good defense to the complaint. The motion must be made within one year after you were served with the judgment and notice of entry. Claims of improper service are decided at a traverse hearing. If you never personally received the summons and learned of it too late, you have one year from learning about the judgment to defend yourself. But you must have a real defense. And you can’t have waited too long - no more than five years from the date the judgment was entered.

Seriously consider getting a lawyer to help with this process. The rules and procedures are detailed, and the time limits exact. Answer the complaint. Write down the date that you were served and the deadline to answer. Getting your attorney all the documents right away can help you spot your defenses quickly. You may still be able to talk settlement even after the judgment was entered.

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.