NUGrowth Capital Litigation: 5 Reasons Default Judgment Is the Real Risk

Business owners don’t know lawsuits. It sounds bad, but they’re not in that world. There are several reasons to ignore it as long as possible: hope the problem fixes itself; how to resolve the problem costs a business owner time and energy to learn; it’s scary. There are many. Unfortunately, there are dangers to waiting until things get really bad before learning about lawsuits, and skipping the answer altogether falls into that category. So, get real: the lawsuit isn’t the real risk. Missing the deadline to answer it is. A default judgment means that NUGrowth won the case without the court ever hearing your side.

1. Silence admits everything

The consequences of default are severe: the court will accept every allegation against you as true. Whether those allegations are really true, by default, does not matter. Missing the deadline to Answer the lawsuit means that you won’t be able to say anything about the case. To get a default judgment for a fixed amount of money, a court clerk enters the judgment based on the amount the plaintiff said they were owed plus interest and court costs. This process does not involve a judge.

2. The clock is short

Business owners are busy. They’ve got operations to manage, staff to supervise, and all the other business pressures that go along with running a business. Unfortunately, lawsuits need attention too. In New York state court, service by hand means 20 days to answer. Other service methods take longer: 30 days after service is complete.

Corporations served through the Secretary of State have their service completed on the date that the Secretary of State receives the papers. Companies receive a mailed copy later, so the clock begins without your knowing it. The clock runs out, you pay. No voice. No defense. No excuses. In most New York courts, a corporation cannot Answer the complaint without a lawyer.

The desire to “work it out” does not mean that the other side feels the same. They hired a lawyer, had you served, and made this very public. Do not assume that negotiating is easy. The person doing those things meant business, so should you.

3. Collection starts almost immediately

Because the allegations in the lawsuit are automatically deemed admitted, the plaintiff has many options for collection. One is a restraining notice on your bank, which freezes up to twice the unpaid judgment, including deposits made after it is served. So, the more money the business puts in, the more the bank freezes. It lasts up to 1 year or until paid. The plaintiff can put a lien on your property.

It doesn’t stop at the bank. The plaintiff can force you to answer questions under oath to find your assets. The sheriff may seize office contents, vehicles, rent owed to you, and even your interest in the company.

4. The judgment keeps growing

Like the proverbial rock rolling downhill, a default judgment just gets worse. It increases by 9% per year on money that you could have addressed in the lawsuit. Once the plaintiff gets a lien on real estate you own in a county, that lien is good for 10 years.

A judgment is public, so a damaged credit score may be in your future too. Liens also impede your efforts to sell or buy property. Title companies likely won’t insure transactions where there are liens. It goes without saying that lenders may not want to lend you money in the first place.

5. Undoing it costs more

Getting out of default is difficult. You must get the court’s permission. The process is called a motion to vacate the default judgment, and it has strict time limits for being filed, 1 year from the day you are served with the judgment and notice of its entry. If you were not personally served and did not get notice in time, you get 1 year from learning of the judgment to ask to defend. But, there is a 5-year outer limit on how long it could be. And, you also have to show that you have a defense that has legal merit. There is no guarantee. Motion attorneys’ fees add to the final tally. The end result is a costly legal battle to be had, before the real issue - the actual disagreement - is heard by the court.

Address the problem - tomorrow, if not sooner. Find an attorney who can help. Get an assessment, and come up with a plan for defense. Write down the date you were served. Gather the contract, any emails relating to the contract or issues in dispute, financial records pertaining to the contract, and start to think about your options. Post-judgment negotiations for payments may still be possible.

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.