Served by Star Advance? 5 Deadlines That Decide the Case

Here are five deadlines to know if you have been sued by a merchant cash advance or MCA funder like Star Advance. Each deadline brings with it different opportunities and risks. The first deadline of most importance is the date to file an answer to the complaint that was served on your business.

The days allowed to answer a complaint are counted differently in different courts. Moreover, the count starts differently. You must check both. There are always exceptions, but the rules in New York tend to apply if the MCA is suing you there. Other states may set different times.

1. The day to appear

In New York, if someone hands you a summons in person, you have 20 days to appear (meaning you file an answer, notice of appearance, or motion). If it’s served any other way, like through the Secretary of State or by leaving it and sending a copy, you have 30 days after service is complete. The days matter. You do not get more time just because you discussed the case over the phone with someone at the funder. You also don’t get more time by applying for a loan or asking for a settlement. The court does not adjust the deadline for those reasons. You get more time or get a late answer accepted only if you can show a reasonable excuse.

If you were served with a summons but not a complaint, you can “demand” a complaint from the funder. If you make a proper demand, the funder must then serve you the complaint within 20 days. Even if you look up the rules for when the clock starts, don’t trust your own math and don’t guess. If you are not sure of the date, have a lawyer check the rules.

2. The removal window

If the case is filed in New York state court, you may have the option to move the case to federal court. There are different rules for these two courts, and to remove a case you have to file your notice with the court within 30 days. That 30 days runs from the date you were served with the complaint. Make sure your calendar counts from the date the complaint was served and not the date it was filed.

3. The bad-service objection

If you want to challenge service of the lawsuit, you will want to plead that objection in your answer. You have 60 days from the time you serve the answer to make a motion to dismiss on the ground of improper service, though the court can extend that deadline on a showing of “undue hardship.” Even if service was no good, you generally lose the chance to object if you don’t move within 60 days after serving your answer. If you think service was bad, then please remember the answer must still be filed, or the default clock starts running. Being an out of state defendant does not automatically guarantee a dismissal of the case.

4. The default judgment clock

If you miss the answer deadline, the funder can seek a default judgment. If your company was served via the Secretary of State, the funder has to mail the summons to the last known address, at least 20 days before the judgment.

If you already missed an answer deadline and have a default judgment against you, don’t assume that nothing can be done. A motion to vacate for “excusable default” can be made within one year after you are served with the judgment and notice of entry. If you never personally got served with the lawsuit, and never appeared, the court might let you in to defend if you can show that you did not know about the judgment in time, and can defend the case on the merits. You can make your motion within one year after you knew about the judgment, but no later than five years after the judgment. No relief is guaranteed, but it is an avenue to explore.

5. The confession of judgment

Some funders will have you sign a confession of judgment for their financing. It lets the funder go right to judgment without even going through the lawsuit process. The funder only has three years after you sign it to file it with the county clerk, and they have to file it in your county of residence, or in the county listed on the confession as your address. A business “resides” in any county where it has a place of business. Having signed a confession of judgment is not an automatic bar to raising defenses. What you signed, how the funder tried to enforce it, and what defenses you have to offer, are questions that will determine if and how your judgment can be fought.

Settlement

You can talk about a settlement, but while you talk, the filing deadline and everything else runs its course. Before signing anything, make sure the deal covers the amount owed in full, all parties including you and your personal guarantor, it shows how the lawsuit will end, and what happens if a payment is missed. Keep a separate file for each MCA and each lawsuit. Settlement of one funder’s financing agreement does not settle all your obligations.

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.