6 New York Enforcement Tools After an MCA Judgment and How to Review Them

In legal terms, your business is a judgment debtor of the cash advance company. The “funder,” as MCA companies are called, is the judgment creditor. When a New York funder obtains a judgment against you or your business entity, they begin the process known as “collecting the judgment.” Unfortunately, this does not mean that they will schedule a collection time to haul away the old garbage in your basement. Instead, it means that they have a number of tools under New York law that allow them to liquidate the judgments they hold - including yours.

There are six main tools a funder can use to collect a judgment: the bank restraining notice, the information subpoena, the marshal or sheriff levy, the income execution, the real property lien and the judgment interest. Each of these tools has its limits. They do not go on forever, but few can be called minor.

If your MCA debt has “officially” turned into a judgment, it is usually one of three things. Either it has been transformed by a confession of judgment, your default after ignoring the lawsuit, or a court confirming an arbitration award. Even when the confession of judgment language is in your agreement, there is still no judgment there. What the funder obtains from the confession language is the ability to file papers in a court and receive a judgment. Many agreements with funders contain provisions calling for the application of New York law, even for an out-of-state business. Understanding your judgment is a key part of knowing how to respond to it. Whatever the origin, once a judgment exists, NY judgment law allows the funders to treat them all the same.

The restraining notice is issued by the funder’s lawyer, and it freezes your bank accounts. One day you have access to your bank account and the next it’s on ice. Once one of your accounts is restrained, your bank holds it for one year or until the judgment is paid or vacated. But once the bank holds an amount equal to double the judgment amount, any money beyond that is free.

The information subpoena is when they send you or your bank a bunch of questions about your assets. You’re sworn to answer it and return it within 7 days of receiving it. So watch out, don’t ignore that one.

The next step is to have the marshal or sheriff do a levy on property. What that means is the funder obtains an execution and that gives the marshal or sheriff the right to seize the money or property in your possession. (The execution is not just some 1980s power ballad, but a legal document that grants the judgment creditor this authority.) An execution by levy can only go on for 60 days unless the levy is actually made or the funder’s lawyer extends it in writing for another 60 days.

What about an income execution? These show up at your job like a nosy relative. NY judgment creditors can hit your wages if you signed the personal guaranty. Not all of it, mind you. They won’t take more than 10% of your gross income, and less if your earnings are low.

One collection tool that can’t be ignored is the real estate lien. A NY judgment creditor can take your judgment and register it in the county where you own real estate. That makes it a lien on your property, good for 10 years. The lien part is bad enough. But the interest part can make the judgment balloon even more. That’s the accrued interest that’s attached to the judgment, currently at 9% a year, tacked on for each year the judgment goes on. Only consumer debts grow at 2% in New York.

The Judgment Was Properly Filed

When you review the judgment, it’s a good idea to see if it was properly filed. Back in 2019, New York passed a new law that said, no, you cannot turn around and file a confession of judgment against an out-of-state business. Look to see where and when the confession was filed. According to NY law, the judgment had to have been filed in the county where you live or have a place of business. And it must be filed within three years after it is signed. How much are they claiming? How does it line up with the schedule of payments in the agreement with the funder?

In New York, you can always try to vacate a default judgment for excusable default, but you’ve got to do it within a year of being served with it. Fraud or lack of jurisdiction as a defense? There’s no deadline in that rule, but don’t wait too long to present your case. And if it’s an arbitration award, you’ll generally need to move to vacate within 90 days of delivery. So time is of the essence.

Always examine each enforcement tool against its limitations. But keep in mind that a court can shoot down any method of enforcement. A judge can restrict, deny or put conditions on any of these tools - on the court’s own motion, or if you go to court and ask.

Attorney General’s Announcement

Another possibility. Early in 2025, the New York Attorney General announced a settlement with 25 MCA companies tied to Yellowstone Capital. The MCAs agreed to stop enforcement on outstanding unpaid amounts, stop any pending enforcement actions and vacate unsatisfied judgments. Take a look at the Attorney General’s announcement to see if your funder is one of them.

What you shouldn’t do is hide your head in the sand. If a funder takes you to court, don’t ignore the papers. Don’t try to shield your assets - the funder could claim that’s a fraudulent transfer and after that you could even face personal liability. Don’t tell your bank the direct debits were unauthorized. Funder took an unauthorized debit from your account? Tell the bank. But only if that’s true.

Bringing it all down to brass tacks - where does this leave you? Pull together all the legal documents - judgment, MCA agreement, bank statements and any notices. Get them to a lawyer who’s familiar with these agreements before any time limit passes. The lawyer should help you determine if the judgment was properly taken and have the best sense of the chances of a court reversing it. Also, they can be very helpful in negotiating a payoff for less than the full amount of the judgment. In many of these cases, a settlement agreement is worked out with the funding company for a reduced payoff of the judgment.