Served by e Financial Tree? 5 Deadlines That Decide the Case

Without delving into the case details, I can state, without hesitation, that the most important deadline, or series of deadlines, relates to responding to the suit. The time between a summons and answer is always critical. In New York courts the answer due date is 20 days from being handed the summons in person, or 30 days if served another way. After that, the lawsuit and defenses still need to get vetted and shaped, with their own deadlines.

1. The answer deadline

Most MCA agreements choose New York courts, and so out-of-state defendants routinely get sued there. Many MCA suits are filed in Kings County or Nassau County Supreme Court. In court the MCA company typically names the business plus every individual who signed a personal guarantee. The business itself need not be in New York. Outside of New York there are usually thirty days to respond, counted from when service is complete. Don’t respond and a default judgment could be entered against the company and every individual guarantor.

The answer to the lawsuit isn’t only a checklist to keep on track: what you put in the answer has the most effect on what you get from the case. Is the product a commercial loan, or a purchase of receivables? Courts look at the finite term (how long does it go for), recourse if the merchant goes bankrupt, and a reconciliation provision. If this really is a loan, New York’s usury law may apply. Interest of over 25% a year is criminal usury, and since 2021 the high court has said that a corporation can raise it too: the loan is void.

Then look for contractual support: under the agreement’s own terms, did a default actually occur? Were reconciliation requests honored, or ignored? Has a single fee been added more than once?

2. The venue demand

This is how a case filed in the wrong county can be moved to another courthouse: serve a written demand with or before the answer, and then file the actual motion within 15 days. One more way to change the courtroom is the removal of a case from state to federal court. Notice of removal must be filed within 30 days of receiving the complaint.

Location also limits a confession of judgment: it can be filed only where the business resided when it signed or resides now. The business resides wherever it has a place of business. And without a New York place of business, generally there can be no New York confession of judgment.

3. The default clock

A missed deadline is not the end of it. With corporate defendants, if service is through Business Corporation Law 306(b), the plaintiff must send by mail an extra copy of the summons at least 20 days before entering a default judgment. A plaintiff waiting over a year after default to seek judgment can get their case dismissed for abandonment.

4. The judgment window

After the judgment goes in, a defendant still has options. A motion to vacate for excusable default can be filed within one year of being served with the judgment and written notice of entry. Or, a defendant may appeal as of right within 30 days of that same service.

A defendant not served personally faces a harder battle. They must offer a real defense and sound reasons to bring it back in, and do it within one year of finding out about the judgment. But they never have more than five years from when the court entered judgment to reopen their case.

5. The bank restraint

After getting a court judgment against the defendants, a funder goes after the money. They can send out a restraint notice to banks freezing accounts for up to a year. The bank can withhold up to twice the amount due.

Some funders go so far as to send notices to customers, or to the payment processors, demanding the payments go to them instead of the merchant. These notices can also be challenged, but the sooner the better.

Negotiated Resolution

Many MCA cases in New York end with some kind of negotiated resolution. And it’s the strength of the defenses that decides the terms of that settlement. A defendant who answers on time with defenses on file is in a different spot than one facing default. But nothing here promises any specific result.

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.