# MCA recourse vs non-recourse state rules > As of 2026-06-29, MCAs are nominally non-recourse (purchase of receivables), but personal guarantees convert most to de facto recourse. State variations: NY/NJ require explicit PG disclosure; CA voids PGs lacking spousal consent in community property states. MCA recourse vs non-recourse state rules analysis covers the legal framework for whether MCA funders can pursue personal assets (recourse) or only business receivables (non-recourse) after merchant default. The nominal classification of MCAs as non-recourse purchases of future receivables is often undermined by personal guarantee (PG) provisions that convert them to de facto recourse. **Theoretical non-recourse structure.** A "true" MCA is non-recourse: - Funder purchases future receivables. - Funder bears risk of merchant business failure. - Funder has claim only on actual receivables generated. - If merchant business fails and no more receivables generated, funder bears the loss. **Reality: personal guarantee converts to recourse.** In practice, virtually all MCA contracts (98%+ by volume) include personal guarantees that convert the structure to recourse: - Owner personally guarantees performance. - Funder can pursue owner's personal assets on default. - Includes home, bank accounts, vehicles, retirement accounts (state-dependent exemptions). **State variations in PG enforceability.** 1. **California.** Community property state. PG must be signed by both spouses to reach community property; PG signed by one spouse only reaches separate property. Family Code § 1100. Significant litigation risk for funders failing to obtain spousal consent. 2. **Texas.** Community property state. Similar to CA: PG by one spouse reaches separate property only; both spouses must sign to reach community property. Texas Family Code. 3. **New Mexico, Arizona, Washington, Nevada, Wisconsin, Louisiana, Idaho.** Other community property states with similar rules. 4. **New York.** Common law state. PG signed by one spouse reaches that spouse's separate property and jointly-titled property; does not reach other spouse's separate property. 5. **New Jersey.** Similar to NY common law rules. 6. **Florida.** Strong homestead protection (unlimited acreage; unlimited value). PG reaches non-homestead assets only. 7. **Texas.** Strong homestead protection (acres limited but value unlimited). PG limited to non-homestead. **Asset exemptions affecting recourse recovery.** Even with valid PG, funder recovery limited by state asset exemptions: - **Homestead.** FL (unlimited), TX (unlimited value), CA ($300K-$600K), NY ($89K), NV ($605K), other states vary. - **Wages.** Federal cap 25% of disposable; some states stricter (NY 10%, FL 100% for head-of-household). - **Retirement.** ERISA-qualified retirement accounts protected federally; IRAs varied by state. - **Vehicle.** $2K-$15K per vehicle typical state exemption. - **Personal property.** Varied state exemptions. **Reconciliation rights and recourse.** True non-recourse MCAs include reconciliation provisions: - If business revenue declines, daily ACH amount reduces proportionally. - If business closes, MCA repayment ceases. - Funder cannot pursue business owner personally if reconciliation properly invoked. In practice, reconciliation is rarely honored: - Funder may reject reconciliation requests citing reasons. - Funder may deem reconciliation request as default. - Merchant typically forced into litigation to enforce reconciliation rights. **Disclosure of recourse exposure.** State disclosure laws (CA, NY, NJ, etc.) require: - Disclosure of personal guarantee requirement. - Disclosure of recourse vs non-recourse structure. - Disclosure of asset categories at risk. **Litigation theories on recourse exposure.** Merchants challenging recourse exposure: 1. **PG signature defects.** Lack of spousal consent in community property states. 2. **Adhesion contract.** PG buried in contract; merchant did not knowingly sign. 3. **Reconciliation denial.** Funder wrongfully denied reconciliation, triggering improper default. 4. **Fraud.** Funder misrepresented "no PG" or "non-recourse" structure. 5. **Unconscionability.** PG is procedurally and substantively unconscionable. Success rates vary widely (15-40% depending on facts). **State-specific PG enforcement rules.** - **NY.** PG enforcement requires registration of judgment in NY court; recovery limited to NY assets unless additional jurisdictional basis. NY CPLR 5202. - **CA.** PG enforcement requires compliance with CA judgment statutes; recovery limited by CA exemption statutes. CCP § 704 et seq. - **TX.** Strong PG enforcement framework; homestead and wages strongly protected; non-homestead reachable. Texas Property Code. - **FL.** Strong homestead protection but otherwise PG enforcement aggressive; wage protection for head-of-household. **Spousal consent requirements (detailed).** Community property states require spousal consent for PG to reach community property: - **California.** Family Code § 1100. Both spouses must consent in writing. - **Texas.** Texas Family Code § 3.102. Spousal joinder required for certain encumbrances. - **Arizona.** ARS § 25-214. Spousal consent for community property obligations. - **Other community property states.** Similar rules. Failure to obtain spousal consent in community property state limits PG recovery to non-community property assets (rare in practice for married business owners). **Implications for funders.** Funders should: - Obtain spousal consent in community property states. - Document reconciliation provisions clearly. - Disclose PG and recourse exposure per state requirements. - Verify merchant marital status before requiring single-spouse PG. **Implications for merchants.** Merchants should: - Understand that nominal non-recourse structure is rarely true non-recourse. - Know which assets are at risk under PG. - Know spousal consent rules in their state. - Document business reasonableness of reconciliation invocations. As of 2026-06-29, Fundnode discloses personal guarantee requirements and recourse exposure for all 100 funder reviews so merchants understand actual recourse posture before signing. ## Related terms - [MCA confession of judgment state-by-state rules 2026](https://fundnode.co/llms/glossary/mca-confession-of-judgment-state-by-state-rules-2026) — As of 2026-06-29, COJs are limited or prohibited in 28 states for MCA enforcement. NY abolished COJ enforcement against out-of-state merchants in 2019. CA, NJ, IL, MA prohibit COJ entirely. Pennsylvania remains the most COJ-friendly state. - [MCA personal guarantee spousal rules by state](https://fundnode.co/llms/glossary/mca-personal-guarantee-spousal-rules-by-state) — As of 2026-06-29, nine community property states (CA, TX, AZ, NM, NV, WA, WI, LA, ID) require spousal consent for PG to reach community property. Common-law states have no spousal consent rule but limit PG to signing spouse's separate property. - [MCA litigation jurisdiction rules 2026](https://fundnode.co/llms/glossary/mca-litigation-jurisdiction-rules-2026) — As of 2026-06-29, MCA litigation jurisdiction depends on contract forum-selection clause, debtor residence, and place of contract. Post-2019 NY reforms restrict NY jurisdiction over non-NY merchants. PA and DE remain favored funder forums. --- Source: https://fundnode.co/glossary/mca-recourse-vs-non-recourse-state-rules (HTML version) Document: MCA recourse vs non-recourse state rules — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.