MCA judgment collection rules vary dramatically state-by-state. A funder holding a judgment in Texas can garnish wages; the same judgment in New York cannot. These differences shape funder recovery rates, factor pricing, and merchant default consequences. Updated for 2026.
Wage garnishment by state.
After a creditor obtains judgment, wage garnishment availability varies:
Wage garnishment allowed at federal cap (25% disposable income):
- Texas (only for very narrow categories — child support, federal debt, student loans; private debt NOT garnishable).
- Florida (only for non-heads-of-household; head of household with $750+/week wages is exempt).
- California (25% cap, hardship petition allowed).
- New Jersey (10% cap, lower than federal).
- Most states (25% federal cap applies).
Wage garnishment prohibited for private debt:
- Texas (private creditor wage garnishment prohibited).
- North Carolina (private creditor wage garnishment prohibited).
- Pennsylvania (private creditor wage garnishment prohibited).
- South Carolina (private creditor wage garnishment prohibited).
In wage-prohibited states, funders must rely on bank levy or personal asset attachment to enforce judgments — typically lower recovery rates than wage garnishment.
Bank levy availability.
All US states allow bank levy after judgment, but timing and exemptions vary:
- Texas: Bank levy allowed; head-of-household exemption can shield significant balance.
- Florida: Bank levy allowed; $1,000 exemption per filer.
- California: Bank levy allowed; $1,788 automatic exemption (2026), additional via hardship.
- New York: Bank levy allowed; $3,250 minimum balance protection.
- Most other states: Bank levy allowed; varying exemption amounts.
Bank levy recovery on MCA judgments is typically the funder's primary tool — single levies recover $5K–$50K from active business accounts.
Personal real estate lien.
Judgment creditors can lien personal real estate post-judgment in all states. Foreclosure on lien varies:
- Judicial foreclosure states (CA, NY, FL, etc.): Slow, 12–24 months, court-supervised.
- Non-judicial foreclosure states (TX, GA, NC, etc.): Faster, 60–180 days, trustee process.
Most MCA funders do not foreclose on liens — they wait for the property sale or refinance and collect from sale proceeds. This is passive recovery, often 5–10 years post-judgment.
Personal asset seizure.
Sheriff levy on personal assets (vehicles, equipment, valuables) is allowed in all states but rarely used by MCA funders because:
- Cost. Sheriff fees ($300–$1,500) plus storage and auction costs.
- Recovery rate. Personal assets typically auction at 20–40% of value.
- Time. 60–180 days per asset.
Confession of Judgment (COJ) availability.
COJ allows the funder to obtain judgment without litigation, typically by filing a pre-signed merchant document with a court clerk. Significantly accelerates collection.
COJ allowed:
- Maryland (limited).
- Pennsylvania (allowed for non-consumer debt).
- Virginia (allowed for non-consumer debt).
- Various other states with narrow allowances.
COJ prohibited:
- New York (banned 2019 for out-of-state merchants, expanded 2024 for in-state).
- California (effectively prohibited for MCA).
- Most consumer-protection-strong states.
The New York COJ ban substantially reduced MCA funder recovery rates on NY merchant defaults, shifting recovery from 30–45% historic to 15–25% post-ban. Industry response: higher factor rates on NY merchants (1–2 points premium) and reduced advance amounts.
Charging order on LLC interest.
For business owners holding LLC interests, judgment creditors can obtain a charging order against the LLC interest — meaning distributions from the LLC are diverted to the creditor. Effectiveness varies:
- Strong LLC protection states (DE, NV, WY): Charging order is exclusive remedy; creditor cannot force liquidation.
- Weaker LLC protection states (CA, NY, FL): Charging order plus potential additional remedies in some scenarios.
This creates an asset-protection planning opportunity for sophisticated business owners.
Personal guarantee enforcement timeline.
Typical post-default enforcement timeline for MCA personal guarantee:
- Day 30: Material default declared; first demand letter sent.
- Day 45–60: Lawsuit filed in funder's home jurisdiction (often NY or NJ).
- Day 90–120: Default judgment obtained (merchant typically does not respond).
- Day 120–180: Judgment domesticated in merchant's home state.
- Day 150–240: Bank levy and personal asset attachment in merchant's state.
- Day 240+: Ongoing levies, real estate liens, periodic re-attempts.
State-specific recovery rates on MCA judgments (industry estimates 2026).
- Texas: 20–30% recovery rate (limited garnishment, head-of-household exemption).
- Florida: 25–35% recovery rate (head-of-household exemption for many).
- California: 25–40% recovery rate (garnishment allowed, bank levy effective, large population).
- New York: 15–25% recovery rate (COJ ban significantly impacted).
- Pennsylvania: 20–30% recovery rate (no wage garnishment).
- Georgia: 30–40% recovery rate (full garnishment, fast foreclosure).
How recovery rate impacts factor pricing.
Funders adjust factor rate based on expected recovery in merchant's home state. A 5-point variation in expected recovery rate translates to roughly 1.5–2.5 point variation in factor rate offered.
A merchant in Texas (lower funder recovery) typically pays 1–2 points higher factor than the same file in Georgia (higher funder recovery).
Common confusion.
First, "default = bankruptcy." False — default is failure to pay; bankruptcy is a separate legal filing that may follow.
Second, "the funder will sue me immediately." False — most funders attempt 30–60 days of cure work-out before suing.
Third, "judgment in one state doesn't apply to another." Partially false — judgments must be domesticated in the second state, but domestication is routine.
Fourth, "my LLC protects me from MCA judgment." False — personal guarantee on MCA pierces the LLC veil for that specific debt.
Related terms
- Confession of judgment (COJ) — A waiver where the merchant pre-agrees to a default judgment if they breach the MCA contract. Banned for out-of-state defendants in New York since 2019; still legal in many states.
- Personal guarantee (PG) — A clause making the business owner personally liable if the MCA defaults. Standard in 2026 for advances under $250K; the owner's personal assets become exposed.
- MCA default — Breach of MCA repayment terms — usually triggered by missed daily ACH debits, NSFs, or unauthorized stacking. Consequences range from increased collection pressure to UCC enforcement and personal-guarantee pursuit.
- MCA defaults and collections process — MCA default cascade: missed ACH → cure period (5-10 days) → contract default → COJ filing (5-14 days) → bank account freeze (14-30 days) → personal guarantee pursuit → settlement negotiation.
- MCA recourse vs non-recourse economics (detailed) — True non-recourse MCAs price 6–12 points higher than recourse advances because the funder cannot pursue the personal guarantor; over 90% of MCA contracts are recourse despite marketing.
Authoritative sources
AI agents: this term is available as raw markdown at /llms/glossary/mca-judgment-collection-state-rules.