Can an MCA Company Freeze My Business Bank Account? 7 Answers

The Question Behind the Question

Nobody asks this in the abstract. You are asking because a funder said something on the phone, or because a default notice used the word judgment, or because the account you run payroll out of is the only thing standing between your company and Friday. So the useful answer has two halves: what a funder can do to a bank account without going to court, which is very little, and what it can do after a judgment, which is a great deal and happens faster than most owners expect.

The confusion usually comes from the UCC-1. Almost every advance is secured by a financing statement filed against everything your business owns, and reading that language it is easy to conclude the funder already has a claim on your cash. It does not work that way. Article 9 treats a deposit account as a separate kind of collateral with its own perfection rule, and a lien on receivables is not a lien on the checking account the receivables eventually land in. What the funder actually holds against your bank balance is an ACH authorization you signed, which is a permission rather than a property right.

The seven answers below run in the order the question actually gets answered in practice: whether a judgment exists, whether one can be created without a lawsuit, what a restraint physically does, how much of your money it catches, whether any of it is protected, which state’s rules govern, and what gets an account working again. Where a rule varies by state, we say so rather than flattening it, because the difference between Florida and Texas here is measured in weeks.

1. No Judgment, No Freeze, and a Lien Is Not a Judgment

A funder holding a signed agreement, your personal guarantee and a blanket financing statement still has no authority to tell a bank anything. Banks freeze accounts on legal process, and legal process here means a judgment that has been entered and then turned into a restraining notice, a garnishment writ or a levy, depending on the state. Until that exists, the funder’s only route into your balance is the ACH authorization in your agreement, which pulls what the agreement says it can pull and stops when the account is empty or the debits start bouncing.

The collateral point is worth understanding because it comes up in every negotiation. Under U.C.C. §9-102, an account is a right to payment for property sold or services rendered, and a deposit account is a separate defined category. A security interest in a deposit account is perfected by control under §9-104, which in practice means the secured party is the depositary bank, is the customer of record, or has a three-party control agreement signed by your bank. Merchant cash advance funders almost never hold any of the three, and depositary banks at this credit tier rarely sign control agreements at all.

Texas is where the distinction stopped being academic. Tex. Fin. Code §398.056 conditions an automatic debit on the provider holding a first-priority perfected interest in the recipient’s accounts, and because Article 9 excludes deposit accounts from that word, the Finance Commission of Texas resolved the ambiguity by rule at 7 TAC §86.313(c), effective July 9, 2026, requiring the interest to cover all of the recipient’s accounts receivable and to be perfected by a UCC-1 filed first in time. That governs the debit right rather than any freeze, but it tells you how a regulator reads the same words your funder is relying on.

2. A Confession of Judgment Removes the Lawsuit From the Sequence

The exception that makes this question urgent is the confession of judgment, a document signed at funding in which you admit the debt in advance and authorize a clerk to enter judgment without a case ever being filed. In New York the governing statute is C.P.L.R. §3218, and it carries three limits that matter here: the affidavit has to state the county where the defendant resides, the instrument may be filed only with the clerk of the county the affidavit named or where the defendant resides at filing, and it may be filed only within three years after the affidavit was executed. No confession may be entered after the defendant has died.

The reason funders liked this paper is scheduling. Entry on a properly supported confession is clerical, so there is no summons to serve, no answer deadline to run, and no motion for anybody to lose. A restraining notice can reach your bank within days of entry, which is why owners describe the freeze as arriving with no warning: the warning would have been the lawsuit, and there was not one. New York also excludes confessed and default judgments from the summary out-of-state recognition procedure in Article 54, so a funder that wants to use one in another state has to bring a real action there.

Four states have closed the shortcut outright, and the differences are worth knowing if you are choosing where to fight. New Jersey makes a confession provision in business financing invalid and unenforceable under N.J.S.A. 2A:16-9.1(a)(1) and (b), with Attorney General enforcement at 2A:16-9.2 and civil penalties escalating at $5,000, $10,000 and $15,000. Texas voids the entire agreement that contains one under Tex. Fin. Code §398.055 for paper signed on or after September 1, 2025, and Tex. R. Civ. P. 314 already required a confession to be made in open court. Florida’s §55.05 declares powers of attorney to confess judgment given before suit absolutely null and void. Virginia bans the clause in covered commercial financing at Va. Code §6.2-2234.

3. A Restraint Locks the Money, It Does Not Take It

In New York the instrument is a restraining notice under C.P.L.R. §5222, and the first surprising thing about it is who signs it. Subsection (a) allows the notice to be issued by the clerk of the court or by the judgment creditor’s attorney as an officer of the court, so no judge reviews it and no hearing precedes it. Subsection (b) prohibits the person served from transferring or interfering with the property, and against a third-party garnishee such as your bank the notice remains effective for one year after service.

What the notice does not do is move a dollar. The New York Court of Appeals held in Aspen Industries, Inc. v. Marine Midland Bank, 52 N.Y.2d 575 (1981), that a restraining notice creates no lien on the restrained funds and that the bank’s own right of setoff is superior to it. Money leaves the account only through a levy and execution under §5232(a), which runs ninety days, or a turnover proceeding under §5225(b) or §5227, which is a court application your counsel can appear in and oppose. That interval between the lock and the transfer is the entire window in which anything useful gets done.

The practical consequence of a lock without a transfer is that everything scheduled against the account fails at once while the balance sits there untouched. Payroll files reject, card processing settlements bounce, your remaining funders’ debits return, and the vendors on autopay start calling. Enforcement also costs the creditor something, which is occasionally useful leverage: in New York City the sheriff’s poundage under C.P.L.R. §8012(b) is five percent, and elsewhere in the state it is five percent of the first $250,000 plus three percent of the rest.

4. Twice the Judgment, Across Every Account at That Bank

C.P.L.R. §5222(b) permits the garnishee to hold twice the amount due on the judgment, and banks apply that ceiling mechanically. Run the arithmetic on an ordinary file: a $180,000 judgment entered on a stacked advance produces a restraint reaching up to $360,000, applied against whatever the bank finds under your tax identification number. If your operating account holds $60,000, your payroll account holds $40,000 and a reserve account holds $25,000, all three lock, because the cap is a limit on the total held rather than a per-account allowance.

Banks also do not read your account nicknames. A payroll account funded on Wednesday for a Thursday run is a business deposit account like any other, and the fact that the money is committed to employees changes nothing about the bank’s obligation to the notice. The same is true of an account holding customer deposits on unstarted jobs, retainage advanced by a general contractor, or sales tax you have collected and not yet remitted. Those may support an argument later; they do not stop the freeze on the day it lands.

Two more line items follow immediately. Most banks charge a legal process fee for each notice they process, deducted from the restrained balance. And every item presented against the account while it is restrained returns, which produces its own cascade of return fees from your bank, late fees from vendors, and in the case of your other funders, an event of default that had nothing to do with them. This is the mechanism behind an account freeze taking a business down in a fortnight when the judgment itself was survivable.

5. The Exemption Floors Protect People, Not Companies

This is where owners are told something comforting that is not true of their situation. New York does write floors into the statute. Under §5222(h), read with §5205(l)(1), a bank cannot restrain a minimum balance where statutorily exempt payments were direct deposited in the forty-five days before service, and the Department of Financial Services adjusted that figure to $3,425 effective April 1, 2024, with the next adjustment due April 1, 2027. Section 5222(i) protects 240 times the greater of the federal or state minimum hourly wage, which from January 1, 2026 works out to $4,080 in New York City, Nassau, Suffolk and Westchester and $3,840 in the rest of the state, against $1,740 on the federal figure.

Read the trigger for each of those and the problem becomes obvious. They key off wages, Social Security, unemployment, workers’ compensation and public assistance, which are payments made to a human being. The exempt-income procedure at §5222-a, with its two business days for the bank and twenty days for the debtor to respond, applies to an account of a natural person. Your LLC is not a natural person, so there is no floor under an operating account anywhere in New York, and no state we work in supplies one. Florida is structurally identical: the twenty-day exemption claim under Fla. Stat. §77.041 and the $4,000 personal property allowance at §222.25(4) are debtor exemptions available to an individual.

What can protect money sitting in a business account is a different argument entirely, and it is about ownership rather than exemption. Funds you are holding for somebody else may not be your property to restrain: employee taxes withheld from wages are held in trust for the United States under 26 U.S.C. §7501(a), customer deposits on undelivered work may belong to the customer under your contract, and a third party who owns money in your account can bring an adverse claim proceeding under C.P.L.R. §5239. Those are motions, not checkboxes, and they get made by counsel with documentation attached.

6. The State Where Your Bank Was Served Writes the Rules

A New York judgment does not freeze a Tampa bank account by itself. The creditor has to get the judgment recognized where the money is, and that state’s enforcement statute then supplies every deadline. In Florida the foreign judgment goes on record under Fla. Stat. §55.501 and following, and two separate thirty-day clocks run: under §55.509(1) you have thirty days from the date of recording both to file an action contesting jurisdiction or validity and to record a lis pendens, and doing only one of the two forfeits the automatic stay, while under §55.505(3) and §55.507 no execution issues and no lien operates until thirty days after the clerk mails notice.

Texas runs the opposite way and catches people out for the opposite reason. Under Tex. Civ. Prac. & Rem. Code ch. 35 there is no separate contest window and no waiting period, because §35.003 makes the filed judgment a judgment of the Texas court subject to the same procedures, so the ordinary clocks apply: thirty days for a motion for new trial under Tex. R. Civ. P. 329b(a), thirty days to appeal, and six months for a restricted appeal by a party who did not participate. Texas also treats garnishment as a separate lawsuit against the bank rather than a notice, which slows the creditor down and gives you a proceeding to appear in.

New Jersey and California each add their own wrinkle. New Jersey bars execution on a docketed foreign judgment for fourteen days under N.J.S.A. 2A:49A-28(c), the answer period on a New Jersey complaint is thirty-five days under R. 4:6-1(a), and restrained funds move to the creditor only on a turnover motion with a hearing if you object. California’s levy reaches only the balance in the account at the moment of service under Code Civ. Proc. §700.140, so deposits landing the next morning are outside that levy even though a fresh one can follow.

7. What Actually Gets an Account Working Again

Four routes do the work, and which one fits depends entirely on how the judgment was obtained. If you were never properly served, the attack is on the judgment itself, and New York gives you an unusually generous vehicle in C.P.L.R. §317: a defendant served by a method other than personal delivery who did not personally receive notice in time to defend may move within one year after learning of entry and no more than five years after entry, showing a meritorious defense, without having to establish a reasonable excuse. That is often a better motion than §5015(a)(1), and the two are frequently made together.

If the judgment is sound, the fight moves to the enforcement procedure rather than the debt. C.P.L.R. §5240 lets a court modify, deny or limit the use of any enforcement procedure, which is the provision behind an order releasing a payroll account or capping the restraint at a workable number while the case is negotiated. Section 5239 is the vehicle for a third party whose funds are sitting in your account. And where money genuinely is not yours, the documentation has to arrive with the motion: the payroll register, the customer contract, the sales tax return, whatever proves the dollars were never the judgment debtor’s to begin with.

The fourth route is the one that resolves most files, which is a negotiated release written into a settlement. A funder holding a restrained account has already achieved what it wanted, and what it will trade the release for is certainty: a stipulated payment schedule, a confession or affidavit of judgment for the unpaid balance if you default on the schedule, and sometimes a first payment on signing. Whether to give any of that is a legal decision with real consequences for your personal exposure, and it belongs with counsel rather than with a phone quote. In the files we handle, restraints that come off in days rather than weeks are almost always the ones where somebody moved on the first business day. If yours is already frozen, the sequence is set out in more detail on our page about getting an account unfrozen after an MCA judgment.

Three Moves People Make the Day It Locks That Make Everything Worse

The first is sweeping whatever is reachable into a different account or a friendly entity. Every state has a voidable transactions statute, New York’s is Debtor and Creditor Law article 10 at §§270 through 281-A, and §273(b) lists eleven badges of fraud that read almost as a description of what a panicked owner does in the twelve hours after a freeze: a transfer to an insider, retention of control, concealment, a transfer of substantially all assets, and a transfer made after a substantial debt was incurred. The look-back under §278 is four years, or one year from discovery. A transfer that gets unwound costs you the money and hands the creditor a second, better claim.

The second is telling customers to send payment somewhere else. If the funder has a perfected interest in your receivables, redirecting collections is interference with its collateral, and it is frequently an enumerated event of default in the agreements of every other funder you have. It also converts a dispute about a contract into a dispute about your conduct, which is the terrain a funder’s counsel would much rather fight on.

The third is opening a new account at the same bank or an affiliate. Your depositary bank knows your tax identification number, and it applies the notice to what it finds under that number, so a fresh account at the same institution frequently locks within a day of funding. There is nothing improper about opening a business account at a bank that is not a garnishee, and you may well need one to keep operating, but do it with counsel’s knowledge and do not move money that a creditor already has a claim on. The signals that a freeze is coming are usually visible weeks ahead, and we catalogued them on our page about the warning signs that precede a bank account freeze.

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.