Served by Cardinal Equity? 5 Deadlines That Decide the Case

When an MCA funding company sues a business, the first thing to check is when its answer is due. Note that many MCA factoring contracts name New York as the proper state for jurisdiction. You get 20 days in New York if the papers are handed to the owner personally, and 30 days if they are given to the Secretary of State instead. If the deadline passes, the funder can ask for a “default.” As for Cardinal Equity, it is listed on at least one law firm’s list of merchant cash advance funders it has dealt with. The rules below apply to it the same way they apply to any other funder. There are five important deadlines: Your answer deadline; Their filing deadline; Your bank freeze deadline; Your appeal deadline; One year to vacate the default. Each of them affects different rights, so each one counts.

1. Answer on time

A default judgment is exactly what the phrase implies: a judgment of fault imposed without the business’ full participation.

If the papers came to you through a state official or one of a few other methods listed in the rules, you have 30. Within that time, you can respond in three ways: serving an answer, or a notice of appearance, or asking the court for more time.

The reason the answer matters is this: a default makes the remaining defenses vanish (although the list of defenses is long and variable.) For instance: New York’s criminal usury law, limits usury to 25% per year (and it’s a felony, if it’s over 25%.) In 2021, the New York Court of Appeals held that a corporation could bring up this defense to void an entire contract. There’s no recovery of principal or interest on criminal usurious loans. Be aware, though, that a court could always try to say this particular case didn’t involve criminal usury at all.

Whether it’s a loan or not depends on the facts, too. Courts consider three things: the reconciliation, the finite term, and the recourse if the merchant goes bankrupt. Some MCA companies warn, “This is not a loan.” With usury, the label in the contract doesn’t decide it. The court looks to see who took the risk of no returns. In 2020, the Appellate Division stated that usury is a defense, but not a counterclaim.

2. Check their filing deadlines

Some deadlines can affect the funder as well. For instance, New York contract suits generally have a six-year deadline. When the contract has a confession of judgment, the deadline to file is three years from the signed affidavit. The confession of judgment must be filed in the county where the business has a place of business or the county named in the affidavit. If you were served through the Secretary of State, the funder should have mailed you a copy of the summons at least 20 days before it took its default. The funder has a year to file for a default. This usually doesn’t matter, but it might.

3. Watch the bank freeze

When judgment is entered, the other side can serve a restraining notice on your bank. This notice is good for a year from service, unless the judgment is sooner paid or overturned. The restraining notice could cover up to twice the judgment amount. Act fast.

4. Appeal within 30 days

An appeal is a legal proceeding to get a higher court to reverse a decision or judgment. The deadline for appeal of a judgment is 30 days after you are served with notice that the court has entered the judgment. An appeal isn’t a good idea in every case, but waiting beyond 30 days is certainly a bad idea. It may still be possible to get the judgment thrown out, but it would no longer be an appeal.

5. Vacate within a year

If you already defaulted, you can still file a motion to vacate the default, but it needs to be within one year of being served with the judgment and written notice of its entry. Then, you can raise all your defenses.

Many Payment Disputes End in a Deal

Note the date you are served, keep the agreement and any emails and texts, and make a record of each debit. Many payment disputes end in a deal, often for reduced payments or a lump sum discount. A settlement should resolve the judgment and bank freeze in writing.

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.