2026 Guide to Navigating Default Judgment in NY
When a Lawsuit Lands
When a process server hands papers to your shop, or a certified envelope from the New York Department of State lands at your front desk, your business has been served with a lawsuit. A default judgment against a New York business runs on a clock counted in days, not weeks. Miss the deadline to respond, and the plaintiff can ask the court for a one-sided win that freezes accounts before you ever face a judge in person in New York courts.
Most business owners do not see a default coming until money starts vanishing. The first sign is usually an operating account that the bank has frozen, with ACH drafts returning unpaid and a payroll run that does not clear. By the time anyone calls a lawyer, the case has moved from summons to default to enforcement, and the road back into the courtroom runs uphill against a judge who has already ruled. Defending against default is one part of business litigation in New York, and it sits next to the contract and partnership claims most owners face at the same time.
What follows is what to do when your business has been sued in New York, what the plaintiff must still prove even when you stay silent, what your company can do to undo a judgment already entered, and the right first step the moment a summons or default motion arrives at your business in this state. Each section that follows maps to one piece of the picture that owners regularly miss before counsel arrives at the firm to take the file. Many default cases run alongside breach of contract claims against the same defendant.
What a Default Judgment Is
A default judgment is a final court order entered against your business because you did not respond to a lawsuit on time. The plaintiff files a summons and complaint, you fail to appear or answer in the right window, and the plaintiff asks the court to enter judgment in their favor with no trial of any kind. The court awards what the plaintiff demanded, plus interest and costs, and the case ends before yours has truly begun in this state.
For a New York business, the most common route to a default runs through the Secretary of State system. A corporation or LLC formed in this state is deemed served the moment the plaintiff hands papers to the Department of State in Albany, even when the certified mail copy never reaches you because the address on file is old or unstaffed. The clock starts on that date, not when your office finally opens the envelope and reads inside.
A default judgment is not just a piece of paper. Once entered, it becomes a money judgment that your business owes the plaintiff, enforceable through restraining notices on bank accounts, levies by city marshals or sheriffs, liens on receivables, and information subpoenas that force vendors and customers to disclose what they pay you. The judgment lasts twenty years in this state and can be renewed for another twenty after it expires.
The Clock Starts Now
Under CPLR 320, a business served personally inside New York has twenty days to respond to a summons. A business served any other way, including service through the Secretary of State, substitute service on a worker, or service outside the state, has thirty days. The deadline runs from when service is complete, which under the Business Corporation Law is the moment papers reach the Secretary of State.
A missed deadline to answer in New York does not mean the case is lost the next morning. It means the plaintiff now has the right to apply for a default judgment under CPLR 3215. In practice plaintiffs often wait weeks or even up to a full year before filing the application. During that window your business can still ask the court for permission to file a late answer under CPLR 3012(d) and skip the default.
Speed matters because every step taken before judgment is easier than every step taken after one. A late answer accepted by the court costs your business a single motion. A default judgment vacated after entry costs a motion, affidavits, a proposed answer, and a judge willing to undo something already done. The same facts win or lose depending on when your business decides to show up before the judge.
Default Is Not Automatic
A default judgment is not a rubber stamp, even when the defendant says nothing. Under CPLR 3215(f), the plaintiff must still prove three things to the court before any judgment can be entered against your business:
Proper Service
That service of process was made on the defendant in compliance with the rules. Defective service is a complete defense and supports vacatur under CPLR 5015(a)(4) with no time limit.
Actual Default
That the defendant actually failed to appear or answer within the time allowed. A late but timely-served filing defeats the default even if the plaintiff has already moved.
Facts Stating a Claim
That the facts in the complaint, taken as true, state a real claim entitled to relief. Conclusory affidavits and unproven damages numbers are where most default motions fall apart.
A verified complaint or sworn affidavit must lay out the facts behind the claim. If the affidavit is conclusory, for example, defendant breached the contract and owes $250,000, with no description of what was promised, what was delivered, and what went wrong, the court can deny the motion or send the damages question to an inquest hearing. The plaintiff's own paperwork is often where a case falls apart.
For your business this means a default judgment is winnable on the plaintiff's failures, not only on your excuses for being late. The deeper read sits in what the plaintiff must show on a default motion in New York, and the same idea shapes every defense path that follows in this guide. Plaintiffs lose default motions far more often than business owners ever imagine before sitting down with counsel.
Vacating a Default in NY
One-year cap from notice of entry. Two-prong test: reasonable excuse for the default + a potentially meritorious defense to the claim. Both prongs required.
No reasonable excuse required. Available where the defendant did not personally receive notice in time to defend. One year from learning of the judgment.
Once a default judgment is entered against a New York business, CPLR 5015 is the main tool for undoing it. The motion has to be filed within one year of being served with notice of entry of the judgment if the ground is excusable default. If the ground is lack of jurisdiction, meaning service was never properly made on your business, there is no one-year cap, and a motion can be filed whenever the judgment surfaces.
The standard for vacating a default on excusable neglect grounds is two-pronged in this state. Your business has to show a reasonable excuse for the default and a potentially meritorious defense to the underlying claim. Both prongs are required. A great excuse with no defense fails. A strong defense with no excuse fails. New York courts have spent decades refining what counts on each side, and the answer turns on facts.
Where service was bad, the analysis is different. A defendant served only through the Secretary of State who never received the mailed copy can also move under CPLR 317, a separate statute requiring no reasonable excuse, only proof that the defendant did not personally receive notice in time to defend and has a meritorious defense to the claim. CPLR 317 motions can run up to one year after learning of the judgment.
Excuse and Real Defense
Reasonable Excuse
Law office failure, missed calendar entry, illness, recent move, misdelivered Secretary of State envelope, carrier that was supposed to defend but did not. Qualifies under CPLR 2005 when described with specifics.
Fails when vague, repeated, or used to mask neglect.
Meritorious Defense
A signed contract with different terms, payment records showing the debt was paid, a witness statement contradicting the complaint, or a counterclaim in your favor.
You do not have to prove you will win at trial, only that a real defense exists on the record.
The reasonable excuse prong is where courts use the most discretion in this state. Law office failure, a missed calendar entry, a lost file, or a paralegal error, can qualify under CPLR 2005, but only when the failure is described in detail with supporting facts and not in vague terms. Illness, an accident, a recent move, a misdelivered envelope from the Secretary of State, or a carrier that was supposed to defend but did not, can all work in the right circumstances and on the right kind of factual record.
What does not qualify is no excuse at all, or a pattern of repeated neglect by the same business or its counsel. A defendant who blames law office failure without saying which office, which failure, or which date will lose the motion before the judge has finished reading. Courts read excuses carefully because the policy of deciding cases on their merits has to balance against the rule that procedural deadlines mean something real. See what counts as a reasonable excuse for a missed deadline in New York.
The meritorious defense prong is lower than most owners expect at first. Your business does not have to prove it will win at trial. It has to show that a defense exists, backed by affidavits or documents, that could plausibly succeed if the case were tried on the merits. A signed contract with different terms, payment records showing the debt was paid, a witness statement contradicting the complaint, or a counterclaim in your favor all qualify. See the showing of merit required to undo a default in New York.
When Service Was Wrong
Bad service is one of the strongest grounds your business has, because it does not require a reasonable excuse and does not require a meritorious defense to attack the court's jurisdiction directly. Under CPLR 5015(a)(4), a judgment entered without personal jurisdiction is void from the start, and the court must vacate it once that lack of jurisdiction is shown by the defendant in proper form to the judge who signed the original order.
For corporations and LLCs, service through the Secretary of State is technically complete the second papers are handed over in Albany. But when your filed address is wrong, stale, or belongs to an old office, the certified mail never reaches anyone who can act on it. New York courts have granted relief in these situations, especially where the plaintiff knew or should have known the address was bad and made no effort to find a person.
Other service problems include the process server who left papers with the wrong person at the wrong door, who never came at all and filed a false affidavit, or who served at an address that has nothing to do with your business operations whatsoever. Any of those defects can void a default judgment regardless of how strong the underlying claim is. See when service of process on a business is defective in New York. That is the cleanest path.
When the Numbers Are Wrong
A default judgment also has to match what the plaintiff pleaded and proved. Under CPLR 3215, the court cannot award more than the amount demanded in the complaint, and damages have to be supported by contracts, invoices, payment records, or sworn testimony at an inquest hearing. The two failures below collapse default motions every term in Kings, New York, Queens, and Richmond County.
The plaintiff demanded $100,000 in the complaint and the motion asks for $250,000 with consequential damages, attorney's fees with no contract clause permitting them, and interest at a rate the contract does not authorize. Under CPLR 3215, the court cannot exceed the demand, and unsupported damages get cut, denied, or pushed to an inquest your business can attend and contest, even after defaulting on liability.
The plaintiff sued on an agreement no one signed, attached the wrong version, or pleaded facts the documents in the file contradict. New York courts have refused to enter default judgments where the contract attached to the motion does not match the contract pleaded, where signature pages are missing, or where the alleged terms appear nowhere in the writing the plaintiff filed.
Deeper reads on each failure: how inflated damages defeat default motions in New York and how unsigned contracts collapse default motions in New York. The plaintiff's own paperwork is the defense.
Doing Nothing Has a Cost
Bank Freeze (CPLR 5222)
A judgment creditor can serve a restraining notice on your bank under CPLR 5222 without a court order. The bank receives the notice and freezes the account up to twice the judgment amount within the hour. A $40,000 judgment becomes $80,000 of working capital that nobody at your business can touch for weeks while the freeze runs its course. The mechanics overlap with judgment enforcement and collection defense more broadly.
Information Subpoenas (CPLR 5224)
Information subpoenas force customers, vendors, banks, and merchant processors to disclose what they owe you, where you bank, and what sits in your receivables. The judgment creditor learns your whole financial picture in a few weeks. Marshals and sheriffs can then levy receivables, seize equipment, and post liens against property held in the business name.
Credit Damage
A judgment is reported to commercial credit bureaus and shows up on Dun & Bradstreet, Experian Business, and Equifax Business reports for years. Loan applications get denied. Lease renewals stall out. Merchant cash advance providers raise rates or close lines on you outright. The reputational damage outlasts the financial damage and can take years to scrub from the record once the judgment is vacated or paid in full.