Two Different Types of Liens
MCA borrowers often face both UCC liens and judgment liens. Confusing the two leads to costly mistakes. A UCC lien is a voluntary security interest you granted when signing the MCA. It is filed proactively at funding. A judgment lien is involuntary, resulting from a court judgment after default. Understanding the difference determines your legal strategy.
UCC Liens Explained
A UCC-1 is filed by the funder with the Secretary of State. It gives a security interest in your business assets. UCC liens are consensual, priority-based with first-filed having first claim, challengeable if defective or unauthorized, and terminated by filing a UCC-3 statement.
Judgment Liens Explained
A judgment lien arises from a court judgment, whether through a confession of judgment, default judgment, or trial verdict. The creditor files against your property. Judgment liens are involuntary, can attach to both business and personal assets, enforceable through bank levies, asset seizure, and garnishment, and last 10 to 20 years depending on the state with renewal options.
Which Is More Dangerous?
Judgment liens are generally more dangerous because they represent enforceable court orders allowing active collection. A UCC lien is a static filing that does not by itself allow asset seizure. The funder must first obtain a judgment to enforce the UCC lien. However, UCC liens have more immediate practical impact on financing ability since they are routinely checked by lenders during underwriting.
Defending Against Both
UCC liens are challenged by disputing the filing, narrowing the scope, or voiding the underlying agreement. Judgment liens are challenged by vacating the underlying judgment through motions based on improper service, defective COJ, or meritorious defenses not yet heard. An attorney can develop a comprehensive strategy addressing both lien types simultaneously to restore your financial position.