Default Judgment: Meaning in a Merchant Cash Advance
A default judgment is a judgment entered against a party who doesn't respond to a lawsuit on time. The court grants the other side's claim without hearing the missing party's defense.
What does default judgment mean?
When you're served with a lawsuit, you have a set number of days to respond. If you don't, the funder can ask the court for a default judgment. The court then enters judgment for the amount claimed, often including fees, without ever hearing your side.
Why does default judgment matter to your business?
Many MCA judgments are default judgments. Owners who are overwhelmed, who think they have no defense or who never saw the papers end up with a judgment they had a chance to negotiate down or defend. Responding on time, even just to buy time to negotiate, keeps your options open.
Can a default judgment be set aside?
Courts sometimes vacate default judgments, for example when service was improper, but the process is harder than responding in the first place.
Why watch your mail?
Keep your addresses current with the funder and the state, so papers reach you.
What does responding look like?
Responding to a lawsuit doesn't mean you have to win it. An answer filed on time, or an attorney's notice of appearance, keeps the case open and gives you room to negotiate a settlement. Many MCA lawsuits settle after the merchant responds, often on better terms than the default judgment would have carried.
What is service of process?
If you believe you were never properly served, tell an attorney right away. Improper service is a common reason courts reopen default judgments.
Where will you see it?
In court records and in collection efforts that follow, such as levies.
Is this legal advice?
This is general information, not legal advice.
Which terms are related to default judgment?
The full list is in the glossary. Owners ask about this in What should I do if I get a demand letter from an MCA funder?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.