MCA judgment after default is the legal instrument that transforms an unpaid MCA balance from a contractual claim into a court-enforceable order. Once a funder holds a judgment, the merchant's negotiating leverage collapses and the funder gains direct authority over bank accounts, receivables, and (via personal guaranty) the owner's personal assets.
The mechanics — two paths to judgment. Funders obtain judgments through one of two procedures:
- Confession of judgment (COJ). A contract clause where the merchant pre-signs an admission of liability that the funder can file in a court of preferred venue after default. The COJ is filed with no merchant notice or participation; the court enters judgment within 30-60 days based on the funder's submitted documents. Historically the dominant path — but New York banned COJ filings against out-of-state merchants in 2019, New Jersey followed in 2021, and 20+ states now restrict or ban the practice. As of 2026, COJs are still actively used in Delaware, Pennsylvania (in-state), Maryland (limited), and a handful of other jurisdictions.
- Standard civil action. Funder files a breach-of-contract suit in the merchant's home state or contract-specified venue. Merchant has 20-30 days to respond. If merchant doesn't respond, funder gets default judgment in 60-90 days. If merchant responds and contests, the case can run 6-18 months to trial or summary judgment.
The mechanics — what judgment enables. A money judgment gives the funder access to a full suite of enforcement tools:
- Bank account levy. Funder serves writs on banks where the merchant or guarantor holds accounts. Banks freeze and remit funds within 2-5 business days. The funder typically doesn't know which banks to serve, so they often serve 5-15 banks based on prior bank statements, processor records, and skip-trace investigations.
- UCC-1 lien enforcement. Most MCA contracts include a UCC-1 financing statement against the merchant's accounts and chattel paper. Post-judgment, the funder can directly intercept payments from the merchant's customers — sending notices instructing customers to pay the funder instead of the merchant.
- Accounts-receivable attachment. Court orders directing third parties (customers, payment processors, factors) to remit owed amounts directly to the funder.
- Personal guaranty pursuit. The personal guaranty signed by the owner converts business judgment into personal liability. Funder can attach personal bank accounts, garnish wages (where state law permits — Texas and Florida largely block wage garnishment), file real-property liens, and pursue vehicles or other personal assets.
- Domestication in other states. A judgment in Delaware or NY can typically be "domesticated" (registered for enforcement) in the merchant's home state within 30-60 days via the Uniform Enforcement of Foreign Judgments Act.
The math — typical exposure. On a defaulted $100K advance with $50K outstanding RTR: - Pre-judgment settlement window: $25-35K lump sum (Stage 3-4 discount). - Post-judgment settlement window: $40-50K plus collection costs. - Full enforcement (if merchant has attachable assets): $50K RTR + 8-15% statutory interest + $5-15K legal fees + $3-10K collection costs = $66-90K total exposure.
The strategic insight — vacating a COJ. Where COJs were filed in NY, NJ, or other jurisdictions that subsequently restricted them, merchants have grounds to vacate (set aside) the judgment via motion practice. A merchant who was based in NY and had a Delaware COJ filed against them post-2019 has strong vacatur grounds. Successful vacatur returns the merchant to pre-judgment negotiating leverage — typically used to negotiate settlement at the Stage 4 discount range (35-50% off RTR).
The strategic insight — bankruptcy as judgment defense. Filing for Chapter 7 or Chapter 11 bankruptcy creates an automatic stay that halts all collection activity — including bank levies, UCC-1 enforcement, and personal-guaranty pursuit. The bankruptcy court then handles the funder's claim as a general unsecured creditor (typically 5-20% recovery in Ch 7, structured payment plan in Ch 11/13). Bankruptcy is often the right tool when multiple MCA judgments are stacked and total exposure exceeds attachable assets.
The strategic insight — what merchants get wrong. Three common errors: (1) Ignoring the lawsuit and letting default judgment enter — eliminates contestation options forever. (2) Negotiating with the funder post-judgment without counsel — the funder's collection costs and statutory interest add up faster than most merchants realize. (3) Hiding assets in family-member accounts post-judgment — fraudulent-conveyance claims add personal liability and potential criminal exposure.
The strategic insight — what merchants get right. Three high-leverage moves: (1) Respond to the lawsuit within the statutory window even if the response is a simple denial — keeps the case live and forces the funder to either litigate or settle. (2) Engage MCA-specialist counsel early — the contracts have specific pressure points (reconciliation failures, COJ venue defects, personal-guaranty enforcement limits) that generalists miss. (3) Settle at Stage 3-4 if cash is available — saves 15-25 points vs post-judgment exposure.
The honest framing. MCA judgment after default is a high-velocity enforcement machine that gives funders direct access to bank accounts, receivables, and personal assets within weeks of judgment entry. The merchant's leverage drops by 60-80% the moment a judgment is entered. The only reliable defenses — pre-judgment settlement, COJ vacatur, bankruptcy — all require action before the funder begins enforcement.
Related terms
- MCA default collections process — The sequence of events triggered when a merchant defaults on an MCA: NSF-trigger notification (1-3 days), in-house collections calls (3-14 days), third-party recovery firm assignment (15-45 days), legal demand letter (30-60 days), confession of judgment filing or civil suit (45-120 days), and post-judgment asset attachment (60-180+ days). The full cycle typically resolves within 6-9 months.
- MCA bankruptcy discharge — The treatment of MCA debt in bankruptcy: business MCA obligations are typically dischargeable in Chapter 7 (for sole proprietors), restructured in Chapter 11/13 reorganizations, but personal guaranties survive corporate bankruptcy unless the guarantor also files personally. Fraud-tainted MCAs (misrepresented financials at funding) can be ruled non-dischargeable.
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