What happens when a lawsuit has been filed against your company for non-payment of an outstanding bill?
The quick answer is that you waited too long and that it would have been best to have addressed the issue prior to providing your vendor/supplier with a reason to pursue litigation. If you have indications that your creditor has lost his patience and you lack the necessary funds to pay the due amount, you should consider hiring a professional Debt Management Company to negotiate a payment reduction and ask for a reasonable length of time to pay the reduced balance. In many cases, settlements between 22% and 50% off the original balance can be obtained with terms of 3 to 12 months.
In the event you have been sued, it is important to have an understanding of the legal process. This is not a legal opinion as I am not an attorney but a practical guide based on many years of business experience. The creditor’s attorney will file a suit at the court house and obtain a docket (index) number which identifies the specific lawsuit. Shortly, thereafter you will be notified that you are being sued. This notification from a legal prospective is called being served. This can happen by having a process server hand you the notice, certified mails or even a notification to the Secretary of State that your company is being sued. Depending on the method of service you will have between 20 to 30 days to file a response to the suit. This response simply stated that you disagree with why you are being sued. Eventually, if you respond a court date will be set and it will be determined if you owe the money. Of course, if you do actually owe the money, you will eventually lose and have to pay the funds owed. If the court finds that you owe the money and you refuse to pay, a Marshall will notified and he/she will try to collect the money normally by seizing the funds in your bank account.
If you decide not to respond to the summons then the process will be accelerated. The creditor’s attorney will ask for a default judgment. If you do not respond the court will assume you are wrong and grant the judgment. The Marshall will be notified and they will attempt to seize your bank account. For instance, if you have a judgment against you for $10,000 and the bank account is seized you will normally lose access to double that amount in this case $20,000 until the bank releases the $10,000 to the creditor plus some ancillary fees. The reason your account is frozen for more than the judgment is to provide a cushion for any extra fees.
If you find yourself in a situation where a lawsuit has been filed against your company for money which you owe then do not ignore the situation. You should contact Business Advisory Center as we are experts in negotiating out-of-court settlements at significantly reduced balances. There is no reason to go to court if you can avoid the situation. Many creditors even the ones which have filed suit against your company more often are willing to settle out of court.