What is the MCA funder judgment collection process and how do funders enforce judgments in 2026?

Full answer

Judgment collection overview 2026. Judgment collection is the most expensive and aggressive phase of MCA collections. Funder has determined that voluntary resolution is impossible and pursues court-ordered recovery. Major MCA collections law firms — Berkovitch & Bouskila (NY), Stein Adler Dabah & Zelkowitz (NY), McCarter & English, Schlam Stone & Dolan, and several others. Judgment converts unsecured debt to secured judgment with broad enforcement powers. Costs to merchant substantial — attorney fees added to balance, post-judgment interest, asset seizure costs.

Lawsuit filing 2026. (a) Lawsuit filed in funder-favorable jurisdiction per contract jurisdiction clause. (b) Common jurisdictions — NY for NY-based funders, FL for FL-based funders, sometimes DE for Delaware-incorporated funders. (c) NY Supreme Court (county-level) common venue. (d) FL Circuit Court common venue. (e) Filing fees $300-$1,500 typical. (f) Service via certified process server. (g) Merchant response window typical 20-30 days.

Default judgment 2026. (a) Default judgment if merchant doesn't respond within window. (b) Default judgment occurs in 70-80% of MCA lawsuits. (c) Common reasons for default — merchant ghosting, no funds for attorney, no defense to claim, out-of-jurisdiction inconvenience. (d) Default judgment includes principal + factor + attorney fees + court costs. (e) Default judgment typical 30-60 days post-filing. (f) Vacating default judgment requires showing of merit and reasonable excuse — expensive and rarely successful.

Contested judgment 2026. (a) Merchant files answer within response window. (b) Litigation proceeds — discovery, motions, possible trial. (c) Litigation cost typical $25K-$150K for merchant defense. (d) Common defenses — usury (rejected for true MCA, accepted for disguised loans), fraud in inducement, unconscionability, lack of personal jurisdiction. (e) Settlement negotiation typical during litigation. (f) Litigated judgment typical 6-24 months post-filing.

Judgment components 2026. (a) Principal balance (original advance amount). (b) Factor amount (factor rate × principal — total payback minus principal). (c) Unpaid daily payments. (d) Late fees and NSF fees. (e) Attorney fees (typical 20-33% of balance per contract). (f) Court costs and filing fees. (g) Process server fees. (h) Post-judgment interest (4-9% per state, accrues from judgment date).

Post-judgment interest rates by state 2026. (a) New York — 9% per year. (b) Florida — 4.75% per year (2026 rate, varies annually). (c) California — 10% per year. (d) Texas — 5% per year. (e) Illinois — 9% per year. (f) Pennsylvania — 6% per year. (g) Post-judgment interest can substantially increase balance over time if enforcement delayed.

Confession of Judgment (COJ) acceleration 2026. (a) COJ pre-filed during contract execution allows judgment without full lawsuit. (b) COJ enforcement timeline days vs months for standard lawsuit. (c) NY COJ law changed Aug 2019 — limited for out-of-NY debtors, but pre-2019 COJs still enforceable, NY-resident COJs still allowed. (d) PA, OH, FL (limited), VA still allow COJ. (e) COJ enforcement filed in NY Supreme Court via 'judgment by confession' procedure. (f) Vacating COJ very difficult — typical only fraud or lack of authority.

Bank levy enforcement 2026. (a) Judgment creditor obtains 'writ of execution' or 'restraining notice'. (b) Notice served on merchant's bank. (c) Bank freezes funds up to judgment amount. (d) Bank turns over funds after holding period (varies by state, typical 21-30 days). (e) Merchant business operations severely impacted. (f) Most aggressive immediate enforcement tactic. (g) Multiple bank accounts can be levied simultaneously.

Sheriff asset seizure 2026. (a) Judgment creditor obtains writ of execution. (b) Sheriff visits business location. (c) Inventory, equipment, vehicles can be seized. (d) Seized property sold at sheriff sale typical 30-60 days post-seizure. (e) Proceeds applied to judgment. (f) Business operations severely impacted or terminated. (g) Real property typically requires separate execution process.

UCC-1 lien enforcement 2026. (a) UCC-1 filed during contract execution covers business assets. (b) Judgment creditor can enforce UCC-1 lien on collateral. (c) Self-help repossession of equipment (in commercial context typically allowed). (d) A/R interception via notice to merchant customers (customers pay funder directly). (e) Inventory liquidation. (f) UCC-1 enforcement may proceed parallel to judgment enforcement.

A/R interception 2026. (a) Notice sent to merchant customers (account debtors). (b) Customer instructed to pay funder directly instead of merchant. (c) Customer compliance varies — large customers comply readily, small customers may ignore. (d) Customer can be sued if they pay merchant despite notice. (e) A/R interception devastating to merchant business — customers learn of merchant default.

Personal guarantee enforcement 2026. (a) Personal judgment against guarantor if PG signed (most MCA contracts). (b) Personal asset seizure subject to state homestead protections. (c) Personal bank account levy. (d) Personal wage garnishment (limited federally — 25% of disposable income max). (e) Personal property seizure. (f) TX, FL strong homestead protections. (g) Personal bankruptcy may discharge PG — Chapter 7 typically discharges, Chapter 13 may include repayment plan.

Real property judgment lien 2026. (a) Judgment recorded in county where merchant or guarantor owns real property. (b) Becomes lien on real property. (c) Cannot be sold or refinanced without satisfying judgment. (d) Judgment lien expires varies by state (typical 5-20 years, renewable). (e) Forced sale via partition action or foreclosure in some states (rare). (f) Most common enforcement method long-term.

Wage garnishment limitations 2026. (a) Federal limit — 25% of disposable income. (b) Some states stricter — TX prohibits commercial debt wage garnishment, FL similar. (c) Personal guarantor's wages garnishable in most states. (d) Owner-paid via business income may not be garnishable as wages. (e) Garnishment continues until judgment paid or limit reached.

Cross-jurisdictional enforcement 2026. (a) Judgment obtained in one state, enforced in another via 'domestication' or 'sister-state judgment'. (b) Uniform Enforcement of Foreign Judgments Act (UEFJA) — most states adopted. (c) Filing fees and process similar to local judgment. (d) NY judgment commonly enforced against merchants in other states. (e) Domestication timeline typical 30-90 days.

Settlement post-judgment 2026. (a) Settlement offers typical 80-100 cents on dollar plus costs. (b) Lump sum settlement most common. (c) Payment plan settlement at higher cents. (d) Satisfaction of judgment filed upon settlement payment. (e) Settlement reported to credit bureaus as 'judgment satisfied'. (f) Original judgment remains on credit report unless vacated (rare). (g) Settlement preferred over continued enforcement for both parties.

Bankruptcy filing post-judgment 2026. (a) Automatic stay halts judgment enforcement. (b) Chapter 7 liquidation may discharge judgment (commercial debt typically dischargeable). (c) Chapter 11 reorganization may restructure judgment. (d) Chapter 13 personal restructuring may include judgment in repayment plan. (e) PG personal liability dischargeable in Chapter 7. (f) Bankruptcy attorney consultation critical post-judgment.

Bottom line. MCA funder judgment collection in 2026 starts with lawsuit filing in funder-favorable jurisdiction per contract clause (NY Supreme Court county-level common for NY funders, FL Circuit Court for FL funders, sometimes DE), filing fees $300-$1,500, service via certified process server, merchant response window 20-30 days. Default judgment in 70-80% of cases (merchant ghosting, no funds for attorney, no defense, out-of-jurisdiction inconvenience) typically 30-60 days post-filing — vacating default very difficult. Contested judgment (litigation cost $25K-$150K, common defenses usury for disguised loans/fraud in inducement/unconscionability/lack of personal jurisdiction) typical 6-24 months. Judgment includes principal + factor + unpaid payments + late/NSF fees + attorney fees (20-33% per contract) + court costs + process server fees + post-judgment interest (NY 9%, FL 4.75%, CA 10%, TX 5%, IL 9%, PA 6%). COJ acceleration (pre-filed during contract, days vs months for standard lawsuit, NY post-2019 limited for out-of-NY but pre-2019 still enforceable, PA/OH/FL limited/VA still allow) enforcement via NY 'judgment by confession' procedure. Major MCA collections law firms — Berkovitch & Bouskila NY, Stein Adler Dabah & Zelkowitz NY, McCarter & English, Schlam Stone & Dolan. Post-judgment enforcement methods — bank levy (writ of execution, bank freezes funds 21-30 days then turnover, most aggressive immediate tactic, multiple accounts levied simultaneously), sheriff asset seizure (inventory/equipment/vehicles seized then sold at sheriff sale 30-60 days post-seizure), UCC-1 lien enforcement (self-help repossession of equipment, A/R interception via notice to customers — customers pay funder directly, devastating to business as customers learn of default), personal guarantee enforcement (personal judgment, personal asset seizure subject to state homestead — TX/FL strong protections — personal bank levy, wage garnishment limited federally 25% disposable income, TX prohibits commercial debt wage garnishment), real property judgment lien (recorded in county, prevents sale/refinance, expires 5-20 years renewable). Cross-jurisdictional enforcement via UEFJA domestication 30-90 days. Settlement post-judgment 80-100 cents on dollar plus costs — lump sum most common, satisfaction of judgment filed upon payment. Bankruptcy filing creates automatic stay — Ch 7 discharges commercial debt and PG, Ch 11 reorganizes, Ch 13 personal restructuring. Judgment collection most expensive and aggressive phase; settlement strongly preferred for both parties.

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