Business owners across the United States who have taken out a merchant cash advance (MCA) may find themselves facing a default judgment if they are unable to repay the loan. This can happen when the lender obtains a court judgment against the business without the owner’s knowledge. What can a business owner do if they want to vacate a default judgment on an MCA?
Potential grounds for vacating a default judgment
A business owner may be able to vacate a default judgment on an MCA if they can show that the judgment was entered improperly. The court may consider various factors when deciding whether to vacate a default judgment, such as:
- Lack of personal jurisdiction: This means the court did not have the authority to hear the case because the owner or the business was not properly connected to the court’s geographic area. However, the analysis of personal jurisdiction can be more complex due to the choice of law provisions as well as forum selection clauses in MCA agreements.
- Improper service: This refers to the lender’s failure to follow the procedures for serving the business owner. If the MCA lender sent the lawsuit to the wrong address or did not provide proof of delivery, the service may be considered improper.
- Fraud: This means the lender engaged in fraudulent activities when obtaining the default judgment, including making false statements or hiding important information.
The business owner must act quickly to vacate a default judgment, as delay can be detrimental to their case. The court may be more likely to vacate a default judgment if the owner can show that they have a valid defense.
Protecting business assets and interests
Vacating a default judgment on an MCA can be complicated. In this situation, business owners may seek the help of an attorney who can guide them through the process and fight for their rights. With legal guidance, business owners may better protect their assets as they aim to get back on their feet.