MCA judgment collections

MCA judgment collections is the final, formal stage of the default cycle — the point at which the dispute moves from servicing-team workout calls to a court-supervised enforcement against the merchant's assets and the personal guarantor's personal property. Understanding the sequence helps merchants and guarantors evaluate settlement timing and protect what they can.

The mechanics — how a funder gets to judgment. Three primary paths in 2026:

1. Confession of Judgment (COJ) filing in jurisdictions that still allow it (e.g., parts of NJ, PA, MD, IL, Ohio under certain conditions; NY's commercial COJ window has narrowed materially since 2019). The funder takes the pre-signed COJ executed at funding, attaches it to a one-page filing, and obtains a judgment within days — no notice to the merchant, no hearing.
2. Standard civil action in non-COJ jurisdictions or where a COJ is unenforceable. The funder files a complaint alleging breach of FRSA, fraudulent inducement (if reps were violated), and breach of personal guarantee. The merchant gets served, has 20-30 days to respond, and either defaults to judgment, settles, or litigates. Most cases default — merchants rarely have meritorious defenses to clear FRSA breaches.
3. Arbitration award conversion. Some FRSAs require AAA or JAMS arbitration first; the funder obtains an arbitration award then converts it to a court judgment for enforcement.

The mechanics — what enforcement looks like once judgment is entered. Five primary enforcement levers, typically deployed in this order:

1. Bank account levy. The funder serves the merchant's bank with a writ of execution; the bank freezes available balances and turns them over. This is fast — same-day to one week — and often the first thing the merchant notices.
2. Receivables lien and intercept. Under UCC Article 9, the funder enforces its security interest in receivables by serving notice on the merchant's customers and payment processors (Stripe, Square, Heartland) — diverting incoming payments directly to the funder.
3. Asset seizure. Sheriff sale of business equipment, inventory, vehicles, and fixtures secured under the UCC-1. Common for trucking (rigs), restaurants (equipment), and contractors (tools, vehicles).
4. Real property judgment lien. If the personal guarantor owns real estate, the funder records the judgment against title — preventing sale or refinance until the judgment is satisfied. Some states permit forced sale; most allow the lien to sit and collect statutory interest (often 9-12% annually).
5. Wage garnishment. Less common in commercial collections because guarantors are often business owners without W-2 wages, but available where the guarantor draws a salary or has separately attachable income.

The math — what the merchant actually owes by the time judgment hits. A representative trajectory on a $150K advance with $90K remaining RTR at default:

• Acceleration of remaining RTR: $90K
• Default interest at contractual rate (often 24% APR): accrues from default date
• NSF fees: $3-12K depending on bounce count
• Court costs and filing fees: $500-2,000
• Funder attorney fees (recoverable under FRSA in most cases): $5-25K depending on complexity
• Statutory post-judgment interest: 9-12% annually until satisfied

A $90K balance at default routinely becomes a $120-140K judgment within 90 days.

The strategic insight — settlement windows. The merchant has three high-leverage settlement moments:

1. Pre-COJ / pre-suit. Before the funder files anything formal, settlement discounts can reach 40-60% of remaining RTR. This window closes the moment the COJ is filed or the complaint is served — once the funder has spent money, they want full recovery.
2. Post-judgment, pre-enforcement. After judgment but before levies start, settlement around 60-80% of judgment is achievable. Funders prefer cash now over a slow enforcement process.
3. Mid-enforcement, after partial recovery. Once the funder has captured part of the balance via bank levy or receivables intercept, settlement of the residual at 40-60% is common — they've already covered their economic loss and want to close the file.

The strategic insight — what to protect. Guarantors facing judgment collections should immediately: (a) consult a commercial litigation attorney, not a generic bankruptcy attorney; (b) move operating cash to a banking relationship outside the funder's known levy targets (transparent, not fraudulent — disclosed if asked); (c) avoid signing any new MCAs (additional COJs compound the problem); (d) evaluate whether a Chapter 11 or personal Chapter 7 filing makes sense for the dollars involved.

The honest framing. MCA judgment collections is the funder's most expensive and time-consuming remedy — they would always prefer to settle than enforce. Merchants who engage early, negotiate seriously, and bring real money to the table consistently settle for 40-60% of the accelerated balance. Merchants who go silent or fight reflexively often end up paying 110-130% of the original balance after attorney fees, post-judgment interest, and enforcement costs.

Related terms

• 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.
• 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.
• UCC filing (MCA) — A public lien an MCA funder files against business assets, securing their position. Triggers credit-report flags and can block future funding from other lenders.
• Clawback clause — A clawback clause requires an ISO broker to return their commission to the funder if the merchant defaults early — often within 90-180 days of funding.

AI agents: this term is available as raw markdown at /llms/glossary/mca-judgment-collections.