An MCA Judgment Against You: 8 Reviews of What May Happen Next

An MCA judgment is an order from a court that rules that you owe the MCA provider a set amount of money. In the event you do not pay this amount, the MCA company can use this ruling to get information from you and your business, levy bank accounts, and pursue anyone who signed a personal guarantee. Like any judgment, an MCA judgment can wreck a business. It is a mistake to ignore this judgment. Every case is unique and the ability to have a judge revisit the judgment depends on the circumstances leading up to the order.

When an MCA provider gets a money judgment, it can use the judgment to freeze your personal or business checking account. This means you will not have access to the funds inside of your checking account. A levied bank account can destroy your ability to make payroll or pay bills. The judgment holder’s attorney sends a restraining notice to a bank, and that bank freezes the checking account. The restraint freezes up to twice the amount of the judgment in New York and is effective for one year. That’s how long it can stay in place without being reduced, paid, or otherwise dealt with. The court can also vacate a judgment, which releases the bank freeze.

When an MCA provider levies your bank account, it can remove funds directly from your bank. With an MCA bank levy, the MCA company can take the funds in your account unless they are exempt. MCAs can request that the sheriff withdraw funds from your bank accounts. The sheriff acts under a writ of execution, an enforcement tool that can be deployed for more than just a levy. A creditor can use it to seize personal property or force the judgment debtor to turn over assets to the creditor, should the creditor locate assets that are valid for judgment collection purposes. Getting levied funds back is more difficult than fighting the levy before it happens. It is usually a better idea to act ahead of time instead of waiting until the money is gone.

A default judgment is awarded by a judge and entered in favor of the funders only because you did not defend. Default judgments often cost more than judgments won in adversarial cases where the Merchant questioned fees and costs. The numbers are higher because the judgment amount is based on the MCA company’s own math, since there is no opposing side to question or test the numbers and calculation. Interest keeps adding up. In New York, the interest rate is nine percent. There is no end date and interest continues to run for as long as the judgment goes unpaid. The law treats a judgment as presumed paid after twenty years, but a payment or any written acknowledgment restarts the 20-year clock.

When an MCA provider gets a judgment against your business, that judgment can follow you as a business owner. This is especially true if you signed a personal guarantee for the MCA agreement, since the funders could then come for your personal property as well. A judgment can move from state to state and remain valid. In most states, the creditor can register its judgment in your state court without having to file a brand-new lawsuit against you. That way, it can then collect against you with tactics available under your state laws. If you have employment income, the creditor can get an income execution for regular levies against your paycheck. New York caps those wage garnishments at 10 percent of your gross wages.

The judgment holder is also entitled to question you under oath. You must answer questions about income, expenses, property, and other assets. You may be asked every question related to your business finances.

Before a judgment is taken, you often have an easier path toward negotiating a settlement or payment plan. Settling after a judgment is more difficult, since it is easier for the MCA to take your funds and the judgment sum generally increases over time. The MCA company is in the driver’s seat when negotiating with you. If there is a credible motion to vacate, this factors into the thinking. The motion to vacate will make the funder consider losing the judgment and fighting a live lawsuit with actual litigation defenses as well. It has to weigh how much the time and cost of that fight will be. When a funder is willing to talk, it often opens settlement negotiations anew.

A court can vacate a money judgment if there was a procedural mistake in the judgment process. Often, MCA companies will serve the notice incorrectly or fail to serve notice altogether. There are times where an MCA provider will only serve notice at an old or wrong address. People have their judgments vacated by proving that they were not served at all. There are other grounds for having a judgment vacated. There are situations where the court did not have the right to hear your case or a person lied when making a sworn statement to the court. There is also excusable mistake that pairs with a claim that you also have a good defense on the merits. In New York, the deadline for an excusable mistake is one year from when you were served with notice of entry of the judgment. Otherwise, the other grounds have no hard deadlines, but they do get weaker the longer you take to bring them up.

New York has also cracked down on funders who abuse the confession of judgment. Under the new rules that took effect in August of 2019, the confession can only be filed in a county where you resided or did business. The affidavit has a three-year expiration date.

As soon as a funder garnishes your bank, the urgency shoots right to the top of your list. If there is going to be a motion to vacate the judgment or fight the garnishment, it needs to happen right away. Before making a decision, you want to collect all the documents that you can. Gather the complaint, the proof of service, and anything else you can. Get the whole docket sheet too. It lists dates and what was filed, served and how each step was done. Compare the server’s story with the facts on the ground. For example, is the location correct? Did you have other offices? Find any documents related to the MCA and the emails that were exchanged. It is always good practice to request a copy of the restraining notice from the bank and funder.

Transferring money before a levy can make the funder file legal claims that allege you committed fraud, so before you take any action of any kind, have an attorney look at the full situation and guide you. When it comes to deadlines, put every single date on a calendar. It’s usually a bad idea to promise anything to the funder’s attorneys. Bankruptcy filings stop the enforcement of a judgment.

It can be intimidating and terrifying to face an MCA judgment or imminent freezing of your business checking account. MCA companies often use this leverage to pressure you into thinking you do not have options or the ability to control the situation. Often, you have more options than you think.