A West Coast Business Capital Lawsuit: 6 Ways These Cases Usually End

If you’re sued by West Coast Business Capital or Yellowstone Capital West, there’s a good chance that the debt is actually covered by a settlement Yellowstone entered with New York State. A report of the agreement with New York attorney general says the remaining debt from the merchants is to be cancelled and those merchants still being pursued for the debts should have lawsuits dropped. But if you get a demand, a suit, or a default judgment, ignoring it is not the best plan.

1. The debt is cancelled

This deal cancels all of the remaining debt owed by merchants and their personal guarantors. You shouldn’t owe anything more. You don’t have to apply, request, or argue to get the debt cancellation.

This applies even if a law firm claims to represent West Coast Business Capital, because Yellowstone Capital West was renamed West Coast Business Capital. The agreement cancelled debts of more than 18,000 businesses nationwide.

2. The lawsuit is dropped

Yellowstone Capital agreed to drop all of its pending lawsuits. The settlement also says that Yellowstone must vacate any judgment that has not been paid in full. If you paid all of the judgment, it’s likely still good.

3. Collection stops for good

Companies covered by the settlement cannot collect the debts owed by merchants and guarantors. They are also banned from selling those debts to anyone else. These companies are banned from the MCA industry for good, which means that Yellowstone and West Coast can never do these financing agreements again. If a lender or merchant cash advance company still contacts you about the covered debt, you can file a complaint on the Attorney General’s website.

4. A default judgment

If you ignore the suit, the plaintiff could get a default judgment against you. In California you generally have 30 days after being served to file an answer. If you don’t, the plaintiff can ask for a default judgment. The plaintiff could garnish your wages, intercept any bank account they find in your name, or get a judgment lien on real estate that you own.

If that happens, you can file a motion to set it aside, but you have six months after the default or judgment was entered against you. You can’t get an extension of that six-month deadline. You have to show that your mistake, inadvertence, surprise, or neglect is excusable.

A creditor that is suing the business can still win a judgment against the business. Even if you shut down the business, the judgment doesn’t just go away. Whether or not you can now be sued for the balance depends on the agreement, the claims, and your defenses to the suit.

5. A defense or a negotiated settlement

A qualified attorney should review the complaint, the MCA agreement you signed, the personal guarantee, and any UCC filings to determine if you have any potential defenses. Not every MCA agreement is enforceable exactly as the company claims. To figure out whether it is, you and your attorney should look closely at exactly what it says about UCC filings, collateral, default, cross-default, confession of judgment, acceleration, and attorney’s fees. There are additional defenses that can apply, but those are fact-specific and are determined by the contract, what documents were signed, and what has happened in the case. The filing of a lawsuit does not preclude a settlement.

Some defendants choose to defend their rights and litigate the lawsuit, while others decide to negotiate or settle. What you do should depend on your case, which is highly fact-specific. You’re trading future possible losses in exchange for the one loss of what you pay to settle the debt now.

6. Bankruptcy or a wind-down

Bankruptcy has exceptions, but filing usually triggers an automatic stay that halts lawsuits, garnishments, and most collection activity. But even if a business files for bankruptcy, that bankruptcy usually does not eliminate or erase the personal guarantee. If bankruptcy is a bad choice for you or your business, you may need a wind-down plan. But when a company dissolves or a sole proprietor stops doing business, that doesn’t mean that any personal guarantees are cancelled.

Closing a business does not stop a pending lawsuit. You cannot just shift equipment, cash, and property into other accounts to avoid a creditor judgment. Your creditors or a court can argue that you are going for a fraudulent transfer. Having an attorney who can explain your options can help you get a better result.

Closing may make the MCA company more aggressive. If your revenue stops flowing, the company may turn to the personal guarantee, the collateral, the UCC lien, and more. Creating an LLC (a Limited Liability Company) may not offer the limited liability you believe it does. In short, just closing doesn’t mean that the lender or a court won’t come after you.

When you have to shut the doors, closing a business is a process that is more complicated than just flipping off a light switch. The right wind-down plan must address the MCA provider and your personal guarantee if you signed one. But a bad plan could make things far worse. Most importantly, a bad plan is one that attempts to skirt around the debt. The actions you take and when you take them can be as important as what the financing agreement says.

The goal is not to hide from the MCA company. Instead, you must address the lawsuit, understand the contract, the guarantee, and the other legal documents. You should know your assets and your paperwork. When you have that information, it is easier to pick the lawful path that fits your situation.

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.