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CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10244
Experience:  I am a businesses law attorney, with experience advising and representing owners and investors.
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I had a small business that I closed about two years ago. I

Customer Question

I had a small business that I closed about two years ago. I now have another business that is not the same type of business. I have refused to accept court papers requesting me to court. The request is for loans I was unable to repay. I don’t desire to
file bankruptcy. Law enforcement has been unable to deliver the request for me to show up for court. Now they are telling my secretary that if I don’t accept the court papers they will close my new business. Can they legally do that? What can the loan companies
do if I never accept the court papers? Do they have other recourses? I don’t have anything in my name that they could put a lend on. I assume the only thing they can do is place this information on my credit report.
Submitted: 1 year ago.
Category: Business Law
Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

  1. What type of business entity was the first business (sole proprietorship, partnership, LLC, Corp)?
  2. Where you a personal guarantor for these loans?
  • Bot***** *****ne, you are most likely personally liable for these debts - it is very rare for commercial lenders to extend credit to small businesses without ensuring that the business owner is personally liable for the debt. It is simply the way that the vast majority of business loans work.
  • If you are one of the very few business owners that was fortunate enough to have an LLC or a Corp that was given credit solely to the business entity (you were not individually named), then you can defend the action and claim that you are not personally liable. But if you refuse to go to court, they will get a default judgment against you anyway!!!

You may be "ducking service" on these loans, but that does not mean that you are immune from suit - the creditors will simply serve by publication, and you are losing the opportunity to appear in court and defend the action.

  1. What type of business is your current business (sole proprietorship, partnership, LLC, Corp)?
  • If you are a sole proprietorship or partnership, your creditors will be able to enforce any judgment they get against you by levying your new business' assets directly.
  • If you have an LLC or a Corp. your creditors will simply take your ownership interest in those entities and use that ownership interest to satisfy the judgment (so they will take ownership of your new business, they can then liquidate or operate your new business as they see fit).
Customer: replied 1 year ago.
My question is that law enforcement has been unable to serve me. If they can't serve me how can the courts file a judgement against me? I haven't refused to go to court, they have not been able to serve me. What else can they do if they can't serve me? Can they close my new business and if yes, what cause could they use?
Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

As I noted above, just because they have been unable to serve you via personal service (apparently they have been making efforts - they talked to your secretary), that doesn't mean they cannot file the complaint. They can make a motion to the court to have the complaint served by "publication" - where they simply publish the suit in the local newspaper for a couple of weeks, then if you fail to answer, get a default judgment against you.

I am surprised that they have not effected "substitute service" on you (leaving a copy with your secretary and mailing a copy to you).

  • (b) (1) Service: How Made. Whenever under these rules service is required or permitted to be made upon a party who is represented by an attorney of record in the proceedings, the service shall be made upon such attorney unless service upon the party himself is ordered by the court. Service upon the attorney or upon a party shall be made by delivering a copy to him; or by transmitting it to him by electronic means; or by mailing it to him at his last known address, or if no address is known, by leaving it with the clerk of the court, or by transmitting it to the clerk by electronic means. Delivery of a copy within this rule means: handing it to the attorney or to the party; or leaving it at his office with his clerk or other person in charge thereof; or, if there is no one in charge, leaving it in a conspicuous place therein; or, if the office is closed or the person to be served has no office, leaving it at his dwelling house or usual place of abode with some person of suitable age and discretion then residing therein. Service by electronic means is complete when the electronic equipment being used by the attorney or party being served acknowledges receipt of the material. If the equipment used by the attorney or party being served does not automatically acknowledge the transmission, service is not complete until the sending party obtains an acknowledgment from the recipient. Service by mail is complete upon mailing.

I think you should invest in legal counsel. I am concerned that your current course of action is going to leave you with civil judgments against you, they can affect your current business (as I stated above), and they will continue to affect you (either through wage garnishment, bank levies, liens on any personal or real property you own or acquire, or on levies against future businesses you may create).

Ignoring the situation is not going to make it go away.