# MCA during receivership > A court-appointed receiver takes control of business operations and bank accounts, which suspends MCA daily ACH; the receiver then negotiates payoff, modification, or rejection of the MCA as part of asset disposition. Receivership — a court-appointed third party taking control of a business's operations and assets — is an alternative to bankruptcy that occurs primarily in state-court enforcement actions (often by senior secured lenders) and certain federal proceedings. **What is receivership.** A receiver is a neutral fiduciary appointed by a court to take possession of, manage, and (often) sell a business or specific assets on behalf of creditors. Common triggers: - Senior lender (bank, SBA) forecloses and requests receiver to operate the collateral. - Partnership dispute where the court appoints a receiver to stabilize the business. - Fraud or regulatory enforcement (SEC, FTC, state AG) where the court takes the business out of management's hands. Unlike bankruptcy, receivership does not have a comprehensive federal statute — procedures vary by state and court. **ACH suspension mechanics.** Once a receiver is appointed: - The receiver takes control of all business bank accounts (or opens new receivership accounts). - The receiver typically revokes all standing ACH authorizations. - MCA daily debits stop within 1–3 business days. This suspension is not technically a default by the merchant — it is a court-ordered action — but the practical effect is the same: payments stop, the MCA contract is now in the receiver's hands. **Receiver's powers re: MCA contracts.** State receivership orders typically grant the receiver authority to: - Reject executory contracts (treat them as terminated, leaving the counterparty with a damages claim). - Modify contracts subject to court approval. - Pay contracts in the ordinary course if necessary to preserve value. Whether an MCA is "executory" is contested — if the funder has already advanced the full lump sum, only the merchant has remaining obligations (to pay), arguably making it not executory. But courts have allowed receivers to suspend MCA daily ACH while the receivership is in progress. **Outcome paths.** Three common outcomes: First, **payoff from sale proceeds.** Receiver sells the business or its assets; the MCA is satisfied from proceeds along with other senior claims. Second, **negotiated settlement.** Receiver negotiates with the MCA funder for a discounted payoff in exchange for releasing the UCC and dropping any claims. Third, **rejection / unsecured claim.** Receiver rejects the MCA contract; funder becomes an unsecured creditor of the receivership estate; recovery depends on asset stack and is often pennies on the dollar. **Personal guarantee.** Unlike bankruptcy, receivership does not stay actions against guarantors — the MCA funder can pursue the personal guarantor in parallel with the receivership proceeding. Guarantors often face simultaneous collection by: - MCA funder. - Senior lender (often the party who triggered the receivership). - Other unpaid creditors. This is why receivership frequently cascades into personal bankruptcy filings by the guarantors. **Federal equity receivership.** Federal courts can appoint receivers in SEC, FTC, or CFTC enforcement actions. These are stricter than state receiverships and typically include an immediate asset freeze that captures the merchant's accounts. MCA funders facing federal receivership often recover little because the federal court prioritizes victim restitution over commercial creditor claims. **Math example.** Texas trucking company is placed into state-court receivership by its SBA lender for covenant defaults. Active MCA: $60K outstanding. - Day 0: Receiver appointed; ACH revoked. - Day 14: MCA funder demands payoff; receiver responds requesting documentation. - Day 45: Receiver auctions trucks for $480K; SBA recovers $410K; junior creditors receive pro rata. - Day 90: Receiver pays MCA funder $18K (30% of outstanding). - Personal guarantor faces $42K deficiency claim outside the receivership. **Common confusions.** First, "Receivership is the same as bankruptcy." False — receivership is state-court (mostly), narrower in scope, and does not stay personal guarantor actions. Second, "Receivership protects the personal guarantor." False — only bankruptcy does, and only if the guarantor files personally. Third, "MCA funders can continue daily ACH during receivership." False — once the receiver controls the bank account, ACH is suspended. Fourth, "Receivership always leads to full asset sale." False — some receiverships stabilize the business and return it to management once disputes are resolved. As of 2026-06-29, Fundnode advises merchants facing imminent receivership to assess whether bankruptcy provides better protection (especially for guarantors) before allowing the receivership to be appointed. ## Related terms - [MCA during bankruptcy](https://fundnode.co/llms/glossary/mca-during-bankruptcy-options) — Filing Chapter 11 or 7 stays MCA collections via the automatic stay, but MCA funders are aggressive secured-receivables claimants — many file relief-from-stay motions within 30 days arguing the MCA is a true sale, not a debt. - [MCA during foreclosure](https://fundnode.co/llms/glossary/mca-during-foreclosure-options) — Real-estate foreclosure does not directly affect MCA contractually, but the loss of business location often triggers MCA default via revenue collapse; merchants should negotiate forbearance before the foreclosure sale completes. - [Personal guarantee (PG)](https://fundnode.co/llms/glossary/personal-guarantee) — 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. --- Source: https://fundnode.co/glossary/mca-during-receivership-options (HTML version) Document: MCA during receivership — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.