# MCA funder recovery fee structure

> Recovery fees on defaulted accounts include asset-investigation ($250-$1,000), skip-trace ($150-$500), levy processing ($500-$2,000), and recovery-percentage commissions (15-35% of recovered amount). Compounds default and collections fees.

MCA funder recovery fee structure governs the costs imposed when funder pursues asset recovery on a defaulted MCA after judgment. Recovery activities include asset investigation, skip-trace (locating merchant), levy processing, sheriff sales, and judgment enforcement. Recovery fees can dramatically increase the total liability and reduce settlement leverage for the merchant.

**Recovery process overview.**

1. **Judgment obtained.** Funder secures court judgment via litigation (or COJ where still permitted).
2. **Asset investigation.** Funder identifies recoverable assets (bank accounts, real estate, vehicles, equipment, receivables).
3. **Skip-trace.** Funder locates merchant if address unknown or merchant has relocated.
4. **Levy / garnishment.** Funder pursues legal process to seize identified assets.
5. **Sheriff sale.** Non-cash assets liquidated through sheriff process.
6. **Personal guarantee enforcement.** If business assets insufficient, funder pursues personal assets per guarantee.

**Typical recovery fee schedules (2026).**

- **Asset investigation.** $250-$1,000 per investigation. Includes UCC search, property records, business filings.
- **Skip-trace.** $150-$500. Used when merchant has relocated or contact information stale.
- **Bank levy processing.** $500-$1,500 per bank account levied.
- **Wage garnishment processing.** $250-$750 per employer.
- **Property lien recording.** $50-$200 per property.
- **Sheriff sale fees.** $1,000-$5,000 (variable by state and asset type).
- **Receivables garnishment.** $250-$1,000 per third-party debtor garnished.
- **Recovery-percentage commission.** 15-35% of recovered amount, paid to recovery agent or attorney.

**Pass-through vs absorbed recovery fees.**

Critical contract distinction:
- **Pass-through.** Merchant contractually obligated to pay all recovery costs on top of judgment. Most aggressive structure.
- **Absorbed.** Funder pays recovery costs from net recovery; merchant pays only judgment plus statutory interest.
- **Hybrid.** Merchant pays specific fees (investigation, skip-trace); funder absorbs percentage commission.

Most MCA contracts include pass-through clauses for some or all recovery costs. Merchants should read the specific clauses carefully.

**The math on recovery impact.**

Merchant defaults with $90K judgment, recovery activity ensues:

- Asset investigation: $750.
- Skip-trace: $300.
- Bank levy on 2 accounts: $2,000.
- Property lien recording: $150.
- Recovery commission at 25%: $90K × 25% = $22,500.
- Total recovery cost: $25,700.

Total merchant liability: $90K judgment + $25,700 recovery + $30,650 prior litigation = $146,350 against original outstanding $90K.

**Personal asset recovery dynamics.**

Personal guarantee enforcement typically involves:

1. **Personal bank account levy.** Most common first step. Notice typically not required; merchant discovers via frozen account.
2. **Personal wage garnishment.** Limited by state law. Federal cap 25% of disposable income; many states have stricter limits.
3. **Personal real estate lien.** Recorded against personally-owned property; affects refinance and sale.
4. **Personal vehicle levy.** Subject to state exemption levels (typically $5K-$15K exemption per vehicle).
5. **Personal investment account levy.** Brokerage accounts, retirement accounts (some retirement accounts protected under ERISA).

**Asset exemptions by state.**

State-by-state asset exemptions critical for personal-asset recovery:

- **Florida.** Unlimited homestead protection (acreage and value); 100% wage exemption for head-of-household.
- **Texas.** Unlimited homestead protection; 100% wage exemption for personal services.
- **California.** Homestead $300K-$600K depending on county; 25% wage garnishment cap.
- **New York.** $89K homestead exemption (downstate); 10% wage garnishment cap.
- **Nevada.** $605K homestead exemption; wage exemption per federal rules.

Merchants facing recovery should understand state-specific exemptions to predict actual recoverable asset base.

**Receivables garnishment.**

For B2B merchants, funder may garnish accounts receivable from third parties:

- Funder identifies merchant's customers via UCC filings, public records, court testimony.
- Funder serves garnishment order on customer.
- Customer must pay merchant's invoices to funder instead of merchant.
- Severely disrupts merchant business operations.
- Customer may terminate relationship rather than deal with garnishment complexity.

**Settlement negotiation post-judgment.**

After judgment but before recovery:

- **Funder's perspective.** Recovery costs $25K-$50K typical; recovery commission 25%; expected net recovery 50-70% of judgment.
- **Merchant's perspective.** Settle for 40-60 cents on dollar to avoid recovery costs and disruption.
- **Settlement window.** Most likely between judgment date and active levy. Once levy begins, leverage diminishes.

A merchant negotiating settlement should propose lump-sum payment of 40-60% of judgment, citing recovery cost avoidance as funder benefit.

**Bankruptcy as recovery defense.**

Filing bankruptcy after judgment but before recovery:

- **Automatic stay.** Halts all recovery activity immediately upon filing.
- **Trustee oversight.** Trustee evaluates assets vs debts; may liquidate non-exempt assets (Chapter 7) or restructure debts (Chapter 13).
- **Discharge.** MCA debt and personal guarantee typically dischargeable unless fraud involved.
- **Exemption claims.** Merchant claims state exemptions (homestead, wages, vehicle) to protect assets.

Bankruptcy is often the optimal endpoint when total debts exceed personal asset value, particularly in states with strong homestead protection.

**State licensing requirements for recovery agents.**

- **California.** Recovery agents must register and be bonded.
- **New York.** Process servers must be licensed; some recovery activities restricted.
- **Texas.** Recovery agents must be licensed for repossession (vehicles, equipment).
- **Florida.** Largely unregulated; complaints to AG.

**Common merchant confusion.**

1. **"Recovery fees are not allowed."** False; commercial recovery fees are legal but must be disclosed.
2. **"Asset exemptions protect me from all recovery."** Partial; exemptions vary by state and asset type.
3. **"I can sue for unauthorized levy."** Yes if levy violates state law; consult attorney.
4. **"Bankruptcy stops recovery permanently."** Mostly true; bankruptcy stays recovery and discharges most debts.
5. **"Recovery commission is the same as collections commission."** Similar concept but applied post-judgment vs pre-judgment.

**Strategic considerations for merchants.**

- Understand state asset exemptions BEFORE signing MCA personal guarantee.
- Maintain documentation of exempt assets (homestead declaration, retirement account beneficiary).
- Consult attorney upon receiving judgment notice; settlement window narrows once recovery begins.
- Consider bankruptcy seriously if total debts exceed personal asset value.
- Document all funder recovery contacts; abusive tactics may violate state law.

As of 2026-06-29, Fundnode discloses recovery-fee structures and personal-guarantee enforcement protocols for all 100 funder reviews so merchants understand full potential default-state liability including post-judgment recovery costs.

## Related terms

- [MCA funder default fee structure](https://fundnode.co/llms/glossary/mca-funder-default-fee-structure) — Default fees triggered by missed payments, NSFs, or contract breach include flat per-event fees ($35-$150 per NSF), default acceleration fees (3-10% of outstanding balance), and collections / litigation referral. Can add $5K-$25K to default-state liability.
- [MCA funder collections fee structure](https://fundnode.co/llms/glossary/mca-funder-collections-fee-structure) — Collections fees on defaulted MCAs typically 15-35% of amount recovered, paid to internal or third-party collectors. Some funders also charge flat collection assignment fees ($500-$2,000). Compounds default fees and reduces merchant settlement leverage.
- [MCA funder litigation fee structure](https://fundnode.co/llms/glossary/mca-funder-litigation-fee-structure) — Litigation costs on defaulted MCAs typically full attorney fees plus 15-25% recovery percentage, passed through to merchant per contract. Can add $10K-$50K to default liability. Funders may also pursue confession-of-judgment for instant levy.
- [MCA funder fee structure (typical)](https://fundnode.co/llms/glossary/mca-funder-fee-structure-typical) — Beyond the factor rate, typical MCA fees include origination (2-5% of advance), underwriting ($150-$500), wire ($25-$50), monthly service ($30-$95), and event-driven fees (modification, default, collections). Total can add 4-9 percentage points equivalent APR.

---

Source: https://fundnode.co/glossary/mca-funder-recovery-fee-structure (HTML version)
Document: MCA funder recovery fee structure — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.