# MCA funder judgment collection process (typical 2026)

> MCA judgment collection typically involves COJ filing (where permitted), default judgment, bank garnishment, real estate liens, wage garnishment of personal guarantor, and asset seizure — pursued for balances over $10-25K with cumulative post-judgment recovery rates of 30-60% depending on guarantor assets.

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.**

1. **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.

2. **Receivable garnishment (UCC enforcement).** Funder notifies merchant's customers to pay funder directly. Highly disruptive — often results in settlement.

3. **Real estate liens.** Filed against PG's personal residence. Doesn't generate immediate cash but encumbers refinance, sale.

4. **Wage garnishment (PG).** Withholds % of PG's wages from employer. State limits apply (CA 25%, NY 10%, etc.).

5. **Personal asset seizure.** Vehicles, equipment, securities accounts. Requires location and identification.

6. **Business asset seizure.** Equipment, inventory, A/R. Requires going concern still operating.

7. **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.**

1. **Usury defense**: MCA was really a loan, violates state usury caps. Mostly unsuccessful but growing traction in CA, NY.
2. **Unconscionability**: Contract terms shockingly one-sided. Limited success.
3. **Failure of reconciliation**: Funder denied reconciliation rights. Growing successful defense.
4. **FTC Act unfair practices**: Specific tactics violated FTC standards.
5. **Fraud in inducement**: Funder misrepresented terms. Hard to prove.
6. **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)](https://fundnode.co/llms/glossary/mca-funder-collections-process-stages) — 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)](https://fundnode.co/llms/glossary/mca-funder-external-collections-vendor-economics) — 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)](https://fundnode.co/llms/glossary/mca-funder-litigation-strategy-typical) — 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)](https://fundnode.co/llms/glossary/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.

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