Each week in New York or in other states, hundreds of small businesses and small business owners are sued by alternative loan and merchant cash advance companies for defaulting. One of the most common questions and thoughts that we hear from small business owners is whether or not they can answer their own lawsuits or even whether or not the small business owner should answer their lawsuit at all. This article describes the importance of answering MCA lawsuits and covers using attorneys in New York, or whether or not a small business owner should attempt to answer their lawsuit on their own.
By Thomas Tramaglini, Chief Operations Officer
Partner, The Center for MCA Research
Should my lawsuit be answered or should I ignore my lawsuit?
Every day small business owners and small businesses are sued by alternative loan and merchant cash advance companies. The majority of these lawsuits are filed in the State of New York. Why are these lawsuits filed in New York? Mainly, these lawsuits are filed in New York because those companies are located in New York, where the laws are very amenable to the goals of the MCA and alternative loan companies.
However, should you answer the MCA or alternative loan company's lawsuit?
The answer is quite simple. Yes.
Failing to answer a lawsuit allows for the MCA company to receive a judgment against your business, and usually the individual as most MCAs are personally guaranteed. And it is easy for the plaintiff to do so - For instance, after the set amount of time given to answer a complaint in the New York Courts all the MCA company needs is for their attorney to have the court clerk sign off on the judgement and boom, the judgement is awarded.
I defaulted and I cannot pay back the MCA company with the terms I was offered. Should I still have the lawsuit answered?
Again, the answer is a YES!
Through the work done on the topic by the Center for Merchant Cash Advance Research, we believe that around 90% of all MCA and alternative loan lawsuits are not answered. That means that 9 in 10 lawsuits achieve a judgement, which can lead to a host of issues for the small business owner.
Most small business owners are never offered relatively helpful payoff terms by MCA companies after defaulting. Instead, they are offered lower payments, blacklisted from future loans and MCAs through Data Merch and other clearinghouses, and those lower payments are increased soon thereafter. Further, when the client is sued, many times they call the suing attorney or collections firm and make a brutally awful deal leading to default and then judgement.
So, when business owners are offered bad deals, many of them know they cannot afford the offer and they fail to answer the lawsuit, leading to a judgement.
Answering the lawsuit gives you a chance.
When you answer the lawsuit it gives you a change. The answer if nothing else tells the MCA company you are going to defend yourself. This costs the MCA company money and logic suggests that answering the lawsuit will save you money and get a better deal than you would if you did not.
Can I answer the alternative loan or MCA lawsuit on my own in New York?
When small business owners and their businesses are sued, the common question is whether or not the small business owner can answer their own lawsuit?
The answer is yes, a small business owner can answer the lawsuit against themselves. However, in New York, "Pursuant to CPLR §321(a) and applicable case law, a limited liability company is required to appear by counsel." So, you need an attorney to answer your lawsuit. Failing to use Counsel will result in a judgement.
Using answer your own lawsuit companies.
We frequently see that small business owners use websites like solosuit.com to answer their lawsuits on their own.
Remember, in New York (and in most states) you must use an attorney to answer your lawsuit if the lawsuit is against your business, so while many of these companies allow you to make your own answers, in New York it will not pass muster and pursuant to law, you will be subject to receive a judgment.
In many cases, when the lawsuit is initially served on the client, the client immediately calls the law firm representing the MCA company or the MCA company directly leading to payback either exactly similar to or more aggressive than what was expected before. Further, without an attorney you are subject to sign an agreement which has excessive default fees, legal fees, and where you yield any legal protection if you have trouble making payments or default. Most of the agreements we see usually have an immediate judgement and no curing period whatsoever in the agreement.
So, When you answer the lawsuit, it allows for an actual negotiation with the creditor to occur that can and usually results in a more amenable payment plan than what the MCA company wants you to be on. Furthermore, having an attorney or team negotiate your agreement is not only about payback which works for you and the creditor, but also ensures that you are not taken to the cleaners if you have any issues.
Working with a debt support company like Beacon Client Solutions makes sense.
Beacon is a small business consultancy whose mission is to help small business owners with corporate turnaround, specifically addressing the business debt of their clients.
What is beneficial about working with a firm like Beacon is that trained experts work to address the small business and small business owner's needs without selling them lines of grandiose, false narratives, fake outcomes which never happen, and more importantly, have attorneys who work for the client, not the firm. We work with attorneys in bulk and because of that, our team offers reduced costs for legal support which is coupled with our services.
So, when someone asks, why hire a firm like Beacon? Our answer is simple. It will cost a lot less than not hiring a firm like ours and you will benefit from supportive, smart, and caring teamwork focused on you.
Dr. Thomas Tramaglini is the Director of Operations and Negotiation for Beacon Client Solutions, a company that supports small businesses on a host of fronts, especially MCA debt. Thomas has been a small business owner for many years, as well as held leadership positions in several organizations and companies. Thomas holds a B.A. in History, as well as Masters and Doctorates in Organizational Leadership from Rutgers University, The State University of New Jersey.
Disclaimer: Beacon Client Solutions is not an accountancy, or a law firm. We are business consultants. While Beacon works with outstanding attorneys and accountants, we cannot and do not provide legal or tax advice. All of our work is connected to those who are legally certified to give such advice. Beacon does have a longstanding body of work in MCA resolution and understands what small business owners deal with, specific to MCA. Beacon Client Solutions serves clients in all 50 states, Puerto Rico, Mexico, and Canada.
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