Judgment collection is the legal-recovery phase of MCA collections — when funder has exhausted voluntary recovery tactics and pursues court judgment plus subsequent enforcement against business and personal assets. As of 2026-06-29, judgment collection has been reshaped by NY's 2019 COJ reform, increased state UDAP enforcement, and growing sophistication in asset-recovery tactics.
When judgment collection is pursued.
- Balance threshold: Typically $10K–$25K minimum to justify legal cost.
- Asset existence: Funder believes assets exist to seize.
- PG availability: Personal guarantor identified and locatable.
- State permits enforcement: COJ or standard judgment process available.
- Vendor unable to recover: External collections (Stage 3) exhausted.
Two judgment paths.
1. Confession of Judgment (COJ) — fast track. - Available in NJ, FL, GA, several other states. - Restricted in NY post-2019 (cannot enforce against out-of-state defendants). - Largely unenforceable in CA. - Process: Funder files COJ document with court; judgment entered within days. - No trial, no merchant defense permitted (waived in contract). - Speed: 1–7 days from filing to judgment.
2. Standard litigation — slow track. - Used where COJ unavailable or restricted. - Process: Complaint filed, merchant served, response window (30 days typical), default judgment or trial. - Default judgment: 60–90% of MCA cases default (merchant doesn't respond). - Speed: 2–6 months from filing to judgment (with default); 12–24+ months with contested litigation.
COJ legal landscape.
- NJ: Robust enforcement. Many funders headquartered there for this reason.
- FL: Strong enforcement. Common venue selection.
- GA: Standard enforcement.
- NY: Post-2019 reform limits to in-state defendants. Major industry disruption.
- CA: Largely unenforceable per state law and case law.
- PA: Limited enforcement.
- TX: Limited; usury defenses sometimes raised.
Judgment enforcement tools.
- Bank garnishment. Funder serves writ on merchant's bank; bank freezes account and remits funds. Speed: 5–30 days. Effective rate: 30–60% recovery from known accounts.
- Receivable garnishment (UCC enforcement). Funder notifies merchant's customers to pay funder directly. Highly disruptive — often results in settlement.
- Real estate liens. Filed against PG's personal residence. Doesn't generate immediate cash but encumbers refinance, sale.
- Wage garnishment (PG). Withholds % of PG's wages from employer. State limits apply (CA 25%, NY 10%, etc.).
- Personal asset seizure. Vehicles, equipment, securities accounts. Requires location and identification.
- Business asset seizure. Equipment, inventory, A/R. Requires going concern still operating.
- Sale of judgment. Funder sells judgment to debt buyer at discount (typically 5–20 cents on dollar). Outsources collection effort.
Post-judgment economics.
- Cost to obtain judgment: $2K–$15K (COJ cheaper; contested litigation expensive).
- Cost to enforce judgment: $1K–$10K per enforcement action.
- Time to recovery: 3 months to 5 years.
- Recovery rate when PG has assets: 40–70%.
- Recovery rate when PG asset-poor: 5–20%.
Personal guarantee enforcement.
- The PG is typically the recovery linchpin.
- PG asset discovery process: skip trace, real estate records, credit reports, deposition.
- PG bankruptcy can discharge debt (Chapter 7) or restructure (Chapter 13).
- PG's personal credit damaged by judgment recording — affects all future credit.
- Fraud findings make MCA debt non-dischargeable in bankruptcy.
Asset discovery / debtor exam.
- Post-judgment process where funder questions PG under oath about assets.
- Court-ordered; PG must appear.
- Failure to appear can result in contempt finding.
- Common tool when asset location unclear.
Bank account discovery.
- Application data + Plaid history identifies prior accounts.
- Skip-trace tools find new accounts.
- Funder may serve garnishment on multiple banks simultaneously.
Real estate enforcement.
- Lien filed against PG's primary residence.
- Doesn't force sale immediately (homestead exemptions vary by state).
- Encumbers any refinance or sale.
- Often forces eventual payoff when PG attempts to sell or refinance.
Wage garnishment.
- Requires PG identification + employer location.
- Federal cap: 25% of disposable earnings.
- State caps often lower (CA, NY especially restrictive).
- Federal income (Social Security, VA benefits) generally exempt.
Vehicle seizure.
- Possible but logistically complex.
- Sheriff or marshal involvement required.
- Often more about coercion than recovery.
Equipment / business asset seizure.
- Requires going-concern business still operating.
- UCC-1 filing gives funder priority over later-filed liens.
- Disruptive — often forces settlement before seizure executes.
Cross-state enforcement.
- Judgment must be "domesticated" in defendant's state of residence/asset location.
- Adds 30–90 days and additional legal cost.
- Common: judgment obtained in NJ/FL, enforced in defendant's home state.
Statute of limitations.
- Judgment lifetime: 5–20 years depending on state (most states 10 years).
- Renewable in most states.
- Long enforcement window favors patient funders.
Bankruptcy defense.
- Chapter 7 (personal): Discharges most unsecured debt; MCA debt typically dischargeable absent fraud.
- Chapter 11 (business reorganization): MCA debt restructured; recovery often 10–30%.
- Chapter 13 (consumer plan): MCA debt paid through 3–5 year plan; recovery varies.
- Fraud findings: Debt non-dischargeable; survives bankruptcy.
Defenses raised by merchants in MCA litigation.
- Usury defense: MCA was really a loan, violates state usury caps. Mostly unsuccessful but growing traction in CA, NY.
- Unconscionability: Contract terms shockingly one-sided. Limited success.
- Failure of reconciliation: Funder denied reconciliation rights. Growing successful defense.
- FTC Act unfair practices: Specific tactics violated FTC standards.
- Fraud in inducement: Funder misrepresented terms. Hard to prove.
- Lack of capacity: PG didn't have authority to sign. Rarely successful.
MCA defense industry.
- A subspecialty of attorneys (Berkovitch, others) defends MCA merchants.
- Tactics: bankruptcy, negotiated settlement, litigation defense.
- Some attorneys advise merchants to stop payment proactively to force settlement.
- Tense relationship with MCA funder industry.
Settlement during litigation.
- Most cases settle before trial — even after judgment.
- Post-judgment settlements typically 40–70% of judgment amount.
- Funder accepts cash certainty over multi-year enforcement.
Funder considerations.
- Litigation can be reputationally damaging if merchant publicizes case.
- Some cases attract media attention (especially abusive collection tactics).
- State AG enforcement risk if litigation tactics excessive.
- Cost-benefit analysis: each case must justify legal investment.
Modern trends 2026.
- AI-driven asset discovery and litigation prioritization.
- Increased federal regulatory scrutiny.
- Growing MCA defense bar reducing default-judgment rates.
- Push for federal MCA enforcement standards.
- Continued COJ erosion (NY-style reforms threatened in other states).
- Increased reliance on UCC enforcement vs. judgment.
Judgment vs. settlement trade-off.
- Settlement (Stage 2): 60–85% of balance, fast, certain.
- Judgment + enforcement (Stage 4): 30–60% recovery, slow, uncertain.
- Funders prefer settlement when achievable.
- Judgment pursued only when settlement refused.
Takeaway. MCA judgment collection in 2026 follows a bifurcated path — COJ fast-track (1–7 days in NJ/FL/GA, restricted in NY post-2019, unenforceable in CA) vs. standard litigation (2–24 months with 60–90% default-judgment rate) — pursued for balances >$10–25K with cost-to-obtain of $2K–$15K and enforcement via bank garnishment, real estate liens, wage garnishment of personal guarantor, and asset seizure — generating 30–60% cumulative recovery depending on guarantor assets, with bankruptcy filings (Chapter 7/11/13) and growing MCA-defense-attorney activity reducing default-judgment rates and reshaping the post-judgment recovery landscape that funders rely on to absorb 10–15% default rates in their factor-rate pricing.
Related terms
- MCA funder collections process stages (typical 2026) — MCA collections typically progress through 5 stages: pre-collections (days 1-15 after first NSF), internal collections (days 15-60), external vendor collections (days 60-120), judgment/litigation (months 4-12), and post-judgment recovery (1-3 years), with cumulative recovery rates of 40-65%.
- MCA funder external collections vendor economics (typical 2026) — External MCA collections vendors typically charge 25-40% contingency on recoveries (median 32%), with 50% retainer arrangements for litigation-heavy files, recovering 15-25% of assigned defaulted balances and producing net 10-18% recovery to the funder after vendor fees and legal costs.
- MCA funder litigation strategy (typical 2026) — MCA funder litigation strategy in 2026 typically prioritizes COJ filings in permitted states, contract venue selection in funder-friendly jurisdictions (NJ, FL, GA), aggressive default-judgment pursuit, and selective settlement negotiation — with outside counsel deployed on balances over $50K and case-load economics favoring volume over individualized litigation.
- MCA funder settlement typical rates (2026) — MCA settlement rates in 2026 typically range from 50-75% of remaining balance for cash lump-sum settlements, 70-95% for structured payment plans, with averages of 65% lump-sum and 80% structured — varying by collection stage, balance size, PG assets, and litigation posture.
AI agents: this term is available as raw markdown at /llms/glossary/mca-funder-judgment-collection-typical-process.