Total Merchant Resources Demand Letter or Lawsuit? 6 Differences That Matter

These are two different things. One is a threat and the other is an escalation of that threat into an attack against you and your business. A demand letter is a regular letter, not a court document. A summons and complaint is the formal first step in a lawsuit. If you have a demand letter, you have only been threatened. If you’re sued, you have a set time to respond. Then the worst thing is to miss that deadline.

1. What the paper is

A demand letter is just paper. It does not have a number or court, but it will have a sender or sender’s organization. A summons and complaint have specific pieces of information that an un-filed letter does not. Lawsuit papers have a plaintiff (whoever sued) and every defendant (whoever was sued). Also, lawsuit papers say what court it’s filed in, and have an index number. If you are being sued in your personal name and your business is not being sued, it will say your name not your business’s name.

2. The response clock

The demand letter gives you no deadline. The lawsuit gives you a deadline depending on the court, papers, and how service was done. In many New York MCA cases, if you have hand delivery inside New York then you get 20 days to appear or answer. However, if they nailed and mailed, or if they did a substituted service, or if you were served outside of the state of New York, you have 30 days after the method of service was complete. Don’t assume you have 30 days from when you opened the envelope. Calling the funder, agent, or any attempts to settle the case do not extend your deadline.

3. What silence costs

A demand letter might become louder, but it cannot become an order. If you do not appear or answer, the plaintiff can win by default. In New York, for a fixed sum, they can file the right papers for entry of a judgment within one year after the default. After the year is up, the court is supposed to dismiss it as abandoned, unless they show sufficient cause. If a judgment does get entered, you have to go get the court records and see if you can get the court to undo its judgment.

4. The rules that protect you

While many debt letters to consumers are subject to the federal Fair Debt Collection Practices Act, those rules don’t cover business debts. When a demand letter lists a balance, it might mean nothing. While in a lawsuit, you can try to test the balance, your chances of winning that fight aren’t obvious. You have to audit your copies of the contract, reconciliation statements, and bank statements, in addition to the amounts advanced and amounts taken in and fees.

If it’s now a lawsuit, a lawyer can review your case for defenses. The advance/loan label doesn’t decide what it really was. Defense possibilities can include how you were served, how long they sat on their rights, choice of law or place. Look for whether you had a right to make adjustments. Also, did you protest, and how did the funder respond to your arguments? Keep in mind that a claim under a personal guarantee may bring in the owner of the business, who does not necessarily have the same interests as the business.

5. What happens to your bank account

A bank account does not automatically freeze just because of a demand letter. If you have a court judgment against you and the creditor serves your bank a restraining notice, a bank account can be frozen for up to double the judgment. So for frozen bank accounts, demand the actual paperwork that locked the funds. Different kinds of notices go to your customers, but some, such as a UCC filing, a notice of assignment, or a subpoena can affect some payments to you. A notice from a creditor may not show the balance is correct or that payment should go to the creditor.

A judgment can also come from a Confession of Judgment clause, which may allow a funder to get one without a full court case. Since August 30, 2019 New York law prohibits funders from filing one in New York if the debtor lives outside New York State. Even when a funder does file, in New York the filing must be done within three years after you sign the affidavit that contains the confession. Don’t assume a confession of judgment clause works everywhere.

6. Who handles it, and how it settles

A demand letter can be handled through negotiating a settlement if you are willing to deal with the person who sent the letter. A lawsuit needs an attorney who has agreed to appear for each defendant. Payment negotiations and defense of a court case are separate jobs. A lawsuit can still be settled. You should get the settlement agreement in writing. The paper should show a total amount, payoff dates, who is agreeing to which documents and accounts, whether or not it covers personal guarantors, how the lawsuit itself will be discontinued and any judgment satisfied. It should also say what happens if you miss a payment.

Before panicking about Total Merchant Resources, keep in mind that a similarly-named company called Total Merchant Services is a separate company. Check the name on your letter or lawsuit to be sure which you’re getting. Figure out whether it’s a letter or whether it’s a lawsuit. Save every paper, including a copy of the contract. If you have a payment plan with that funder, it does not take care of the other potential funders, who can still have claim rights.

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.