Radium2 Capital Lawsuit: 7 Things to Do in the First 72 Hours

The Reported Decision, and Why It Shapes the First Three Days

The public record on this funder that a defendant should know about is J.P.R. Mechanical, Inc. v. Radium2 Capital, LLC, Adversary No. 21-07079, 2025 WL 1550541 (Bankr. S.D.N.Y. May 30, 2025). Three holdings in that opinion, at *8 and *9, matter for what you do this week. The court held that a reconciliation right available only once per month, in an agreement that imposed no obligation to return what had been overcollected, was not a true reconciliation provision. It held that the merchant’s bankruptcy filing was not itself an event of default under the agreement, but that actions interfering with the funder’s right to collect were, and so was notifying the funder that the ACH withdrawals would not be completed. And it found that extensive personal guaranties combined with a right to accelerate gave the funder effective recourse.

Read that middle holding twice, because it is the one with a 72-hour consequence. In an agreement drafted that way, the sentence a distressed business owner most wants to say out loud, that tomorrow’s debit is not going to clear, is the sentence that supplies the default. What follows is sequenced with that in mind. And the standard caution applies with full force: that decision construed the agreement and the conduct in that case. Your form may read differently, and your first job is to read your own contract rather than assume a published opinion describes it.

1. Stop Talking About the ACH Until Someone Reads Your Default Section

In the ordinary course, a business owner whose account is about to be short calls the funder and says so. It feels responsible, and in some agreements it is the act that converts a payment problem into an event of default with an accelerated balance attached. The bankruptcy court in the 2025 decision described exactly that structure: interference with the funder’s right to collect was a default, and so was notice that the ACH withdrawals would not be completed. Whether your agreement contains the same triggers is a question you can answer in ten minutes by reading the events-of-default section, and it is worth doing before the next phone call.

This is not advice to hide from your funder or to let debits fail without saying anything, both of which carry their own consequences. It is a sequencing point. Read the section, then decide what to communicate and in what form, ideally in writing and ideally through counsel once a lawsuit is already on file. Written communication also solves a second problem, which is that collection calls are recorded and an offhand statement about revenue, other funders or your ability to pay tends to reappear later in an affidavit.

The same logic applies to the account itself. Closing the operating account, opening a new one at a different bank, or revoking the ACH authorization are each capable of being characterized as interference under agreements drafted this way. Sometimes those steps are still correct, and there are circumstances where a business genuinely has to protect payroll. The point is that the decision belongs to someone who has read your default clause and can weigh what it costs against what it saves.

2. Establish Whether the Guaranty Is in the Case

Look at the caption and count the defendants. If your personal name appears next to the company’s, the funder is enforcing a guaranty in the same action, and everything about the exposure changes. The 2025 decision treated extensive personal guaranties, combined with a right to accelerate and collect the entire outstanding amount, as giving the funder effective recourse, which matters legally because a genuine purchase of receivables is supposed to leave the buyer holding the risk of the merchant’s failure. A funder that can collect the full balance from an individual regardless of what the receivables do is not in that position.

For you the practical consequence is immediate. A guarantor defendant needs an answer of their own, on their own deadline, and a corporate answer filed by the company’s lawyer does not cover an individual who was served separately. It is also worth checking whether the guaranty is limited or unlimited, whether it contains its own venue and jury-waiver terms, and whether a spouse signed anything. Those details drive what a judgment could reach later far more than the size of the balance does.

The enforceability analysis itself is a separate project and not a 72-hour task. Guaranties fail for identifiable reasons, including defects in execution, releases buried in later documents and the scope of what was actually guaranteed, and the full list is set out on our page on whether a personal guarantee is enforceable. What you need this week is simply to know that the individual is in the case and has a clock running.

3. Count Your Deadline From Completion of Service

The date on the summons is not your start date. In New York state court the answer period is 20 or 30 days depending on the manner of service, set by C.P.L.R. §3012(a) and (c). In federal court a defendant has 21 days after being served under Fed. R. Civ. P. 12(a)(1)(A)(i). Where an individual was served by delivery to someone else at the residence or place of business plus a mailing, C.P.L.R. §308(2) does not treat service as complete on the day of delivery. Completion follows the filing of proof of service by 10 days, which can move your real deadline by two weeks.

Funders and their collection counsel understand these mechanics better than most defendants, and the case economics reward silence. A default judgment gives a creditor a fixed sum instead of a contested claim, accruing post-judgment interest at 9% a year on a business debt in New York, and it opens the enforcement toolkit including a restraining notice that reaches a bank account. Getting an answer on file is not a formality. It is the difference between a case with defenses in it and a collection file.

If the deadline is tight, ask opposing counsel for an extension in writing and file the stipulation. Extensions early in a case are routinely granted because they cost the plaintiff nothing, and the alternative is a motion practice neither side wants. What does not work is assuming that ongoing settlement discussions suspend the deadline. They do not, and a merchant who learns that from a default judgment has learned it the expensive way.

4. Build the Overcollection Schedule Your Contract Never Required

The 2025 decision drew a distinction most merchants have never considered: adjusting tomorrow’s payment is a different thing from returning yesterday’s excess. The court held that a monthly reconciliation right in an agreement with no obligation to return overcollections was not a true reconciliation provision at all. That framing is available to you whether or not your own clause promises a refund, because the calculation itself is what makes the point. Nobody needs a contractual right to do arithmetic.

The schedule is straightforward and you can build it in an evening from bank statements. For each month, list total deposits, the percentage of receipts the agreement specifies, the amount that percentage would have produced, the amount actually remitted, and the difference. Six months of that on a single page is a number rather than a complaint, and it is the document that changes the tone of a negotiation. It is also what counsel needs in order to say anything useful about whether a reconciliation theory is real in your file.

Pair it with the correspondence record. Every request you made, the date, the channel, and what came back. A merchant who asked in writing and was refused is in a materially different position from a merchant who never asked, and the difference is visible in a courtroom. What funders actually say when they turn a request down, and which reasons hold up, is collected on our page on reconciliation denial reasons.

5. Serve a Venue Demand If the County Is Wrong

Of all the objections available to a defendant, improper venue has the shortest fuse. C.P.L.R. §511(a) requires the demand to be served with the answer or before it, which means the decision has to be made while you are still assembling a defense. The mechanics that follow are exact: the written demand names the county the defendant says is proper, the defendant may move to change the place of trial within 15 days after service of the demand, and the plaintiff has 5 days to serve a written consent instead.

Merchants sued far from home usually assume the forum clause settles it. It does not always. Gen. Oblig. Law §5-1402 operates as a floor for New York jurisdiction rather than a ceiling, B.C.L. §1314(b) limits actions against foreign corporations, and trial courts in Kings County have split on whether these cases belong there, with one decision retaining a case and another vacating a default and dismissing. No appellate ruling has resolved that split, so the honest description is that this is contested territory rather than a rule you can rely on.

Weigh it for what it is. A change of venue does not defeat a claim, and after the deadline passes the defendant is left with the discretionary route, which requires showing that the plaintiff’s county is improper and yours is proper. What venue work buys is cost and inconvenience on the other side and a court closer to your witnesses, both of which show up in the settlement number rather than in a dismissal order.

6. Find Out Who Actually Owns the File Now

Advance paper changes hands, and the entity collecting from you today is not necessarily the entity that funded you. Compare the plaintiff’s name against your agreement, your bank descriptors and the UCC filings in your state of organization. Where they do not match, send a written demand for proof of the assignment. U.C.C. §9-406(c) requires an assignee that demands payment to seasonably furnish reasonable proof that the assignment was made, and provides that without it the obligor may discharge the obligation by paying the assignor.

Two honest caveats. That subsection was written for account debtors on assigned accounts, so applying it to a merchant on advance paper is an argument rather than settled law, and a plaintiff will usually produce something rather than test it. The demand is still worth making, because a purchaser that cannot document a clean chain has a proof problem in its own case, and because the answer tells you who you are actually negotiating with. A holder that bought at a discount prices a settlement differently than the original funder does.

There are usually signs before the transfer shows up in a caption: a new servicer name on the debit, correspondence from a company you have never heard of, a sudden change in the tone or the phone numbers. Those patterns, and what each of them implies about where the file is headed, are described on our page on the signs your file is being sold.

7. Get the Bankruptcy Question Answered Properly, Not Reflexively

Filing a petition puts the automatic stay of 11 U.S.C. §362 in place immediately, which halts collection activity, lawsuits and account restraints on the day of filing. For a small business, Subchapter V of chapter 11 is the realistic version, available where noncontingent liquidated debts fall below $3,424,000 for cases filed on or after April 1, 2025, a threshold that sits in 11 U.S.C. §101(51D) and is adjusted every three years under §104. There is no quarterly United States Trustee fee in a Subchapter V case, which is one of the reasons it exists.

It is worth knowing that the 2025 decision arose inside a bankruptcy case, as an adversary proceeding against the funder, and that the court in that case held the bankruptcy filing itself was not an event of default under the agreement. That is a narrow holding about one contract, not a general rule, and clauses purporting to make a filing a default get litigated on their own terms. What it does illustrate is that bankruptcy is a forum in which advance agreements get examined closely, which is part of why it appears in a negotiation calculus at all.

None of that makes filing a first-week move. It is a decision with consequences for licensing, bonding, vendor terms and future credit, and it should be evaluated against the alternatives with counsel who has read your document. Using it as a threat in a collection call is worse than useless. What you should do in the next three days is get the number for your noncontingent liquidated debts assembled so the option can be evaluated quickly if it becomes necessary.

Before You Move Any Money

The instinct in week one is to protect cash, and it is where otherwise defensible businesses create genuine personal exposure. Moving funds to a personal account, paying yourself back for a shareholder loan, transferring equipment or vehicles to a relative or a new entity, and prepaying a friendly vendor all look reasonable from inside a panic. Under New York’s Debtor and Creditor Law article 10, sections 270 through 281-A, a transfer made with actual intent to hinder, delay or defraud a creditor is voidable, and section 273(b) supplies eleven badges courts use to infer that intent, including transfers to insiders, retained control, concealment and inadequate consideration.

The limitations structure is not forgiving either: four years generally under section 278, or one year from discovery on an actual-intent claim, and one year for an insider transfer under section 274(b). The practical consequence is that a transfer made this month can be unwound years later, with the transferee dragged into the case and the individual’s credibility damaged in every other part of it. Paying ordinary operating expenses, payroll and taxes as they come due is a different thing from restructuring your balance sheet under pressure. If any transaction outside the ordinary course is on your mind, it needs counsel first, and the analysis is about the legal test rather than about how to make a transfer hard to find.

Who Should You Call? Our Top-Rated Business Debt Firms

One firm on this list works the entire lifecycle of a business debt file, from stopping the daily debits through attorney-led negotiation, UCC lien removal, and a signed release. The other two cover broader debt categories that often sit alongside the advances. Choose accordingly.