How a default ends up on the record
Merchant cash advance agreements often choose New York law and New York courts, so owners in other states are sometimes sued here without realizing it. A default judgment is entered when no answer is filed in time, and service may have been attempted at an address the agreement listed or by a method the contract claimed to authorize. Older agreements sometimes relied on confessions of judgment, which New York restricted for out-of-state defendants in 2019. Once a judgment is entered, the funder can use restraining notices and levies to reach bank accounts, and those can arrive before an owner understands what happened. The judgment does not end the analysis, but it does shift the burden onto the business.
Grounds for setting it aside
In New York, a defendant asking to vacate a default usually needs to show a reasonable excuse for not responding and a potentially meritorious defense, and that motion has a time limit tied to service of the judgment with notice of entry. If service was never properly made, the court may lack jurisdiction, which is analyzed differently and does not depend on the same showing. A separate provision can help someone who was served by a method other than personal delivery and did not actually receive notice in time to defend. Defenses in these cases frequently center on whether the deal was really a loan in disguise, which can raise usury questions, and on whether the funder honored reconciliation terms. Courts look closely at the specific contract, so results are not uniform.
What to bring to a review
Bring the agreement and any addenda, your payment history and bank statements showing the debits, any reconciliation requests you sent, and every paper you received about the lawsuit, including the envelope if you still have it. Be ready to tell us where the business and its owners were located when the case was filed and who usually receives mail there. If a personal guaranty was signed, the judgment may name you individually, and your personal accounts may be at risk too. We review whether service holds up, whether a motion to vacate is timely, and whether negotiating a release of the restraint while the motion is pending makes sense. Moving promptly matters, because every week of restraint affects the business and some deadlines are short.
