8 Things to Know About Prejudgment Remedies in MCA Lawsuits

When an MCA funder sues you, the lawsuit itself isn’t what should scare you. Lawsuits take months. What should scare you is what the funder can do in the first 48 hours, before you’ve even been served, before a judge has heard your side of anything. That’s what a prejudgment remedy is. It’s the funder reaching into your bank account, your receivables, your processor, before the case is decided. And in New York, which is where most of these cases get filed, the rules are tilted hard in the funder’s favor.

Short answer: a prejudgment remedy is a court order, or in some cases a self-help action, that locks up your money while the lawsuit plays out. The most common ones in MCA litigation are confessions of judgment, attachments, restraining notices, and UCC lien enforcement against your receivables. Some of these don’t even require a judge to sign off before they hit. By the time you find out, the money is already frozen.

Here are the 8 things every business owner, and every personal guarantor, should know before an MCA lawsuit lands.

1. The confession of judgment is the fastest weapon, and you probably already signed one.

Buried in most MCA agreements, usually on a separate page, is a confession of judgment. This is a document where you pre-agree that if the funder says you defaulted, they can walk into court, file that confession, and get a judgment against you without a trial, without a hearing, without you being notified first. New York tightened the rules on COJs in 2019, and out-of-state business owners can no longer have a New York COJ entered against them. But if you’re a New York business, or the agreement was structured to comply with the newer rules, this is still live. A funder with a signed COJ can get a judgment in days. Not weeks. Days.

2. An order of attachment can freeze your bank accounts before you’re served with the lawsuit.

Under CPLR 6201, a funder can ask a New York judge for an order of attachment at the very start of the case, and often ex parte, meaning you’re not in the room and you don’t know it’s happening. The funder has to show a likelihood of success and that you’re likely to dissipate assets, hide money, or leave the jurisdiction. Funders argue all three routinely. A signed order of attachment goes to the sheriff, or to your bank directly, and the account gets frozen. You find out when a vendor payment bounces.

3. Restraining notices are even faster, and don’t require a judge.

Once a funder has a judgment, CPLR 5222 lets their attorney issue a restraining notice, on attorney letterhead, with no court involvement at all. The notice goes to your bank, your processor, your customers. Anyone holding money that belongs to you. The moment that bank receives the notice, your account is frozen up to twice the judgment amount. No hearing. No call. The attorney prints it, sends it, done.

4. The UCC-1 you signed at closing becomes a weapon the day you default.

When you took the MCA, you signed a security agreement, and the funder filed a UCC-1 against your receivables. Most business owners don’t read it. At default, the funder sends notices under UCC 9-406 to your credit card processor, your customers, and anyone else on your bank statements who pays you. These notices instruct those parties to redirect payments to the funder. This is not a lawsuit. This is not a court order. This is contract rights plus a filed UCC, and it’s self-executing. Your processor gets the notice on Monday, your deposits are going to the funder by Wednesday.

5. Personal guarantees mean your house, your car, and your personal accounts are in play too.

Almost every MCA has a personal guarantee, or a performance guarantee, signed by the owner. When the funder files suit, they name you personally. Attachment orders and restraining notices don’t just hit the business — they hit your personal checking, your savings, sometimes joint accounts with a spouse. I’ve seen funders restrain a guarantor’s personal account and freeze the mortgage payment in the same week. The guarantee is what makes this personal, and it’s why MCA default is fundamentally different from a corporate loan default.

6. Ex parte means you find out last.

The thing that catches business owners off guard, every single time, is that the first three remedies above (COJ, attachment, restraining notice) can all happen without you being told in advance. By design. The funder’s lawyers know that if you get notice, you move money. So the whole system is built to land the remedy first, and let you object after. You will get your day in court, eventually. But eventually is after your payroll bounced, your rent bounced, and your vendors stopped shipping.

7. You can fight a prejudgment remedy, but the clock is brutal.

Once an attachment or restraining notice hits, you have a short window to move to vacate. For attachments, the statute gives you the right to move to vacate or modify, and the funder has to confirm the order within a tight timeframe or lose it. For restraining notices, you can move for a protective order under CPLR 5240. But you need an attorney who knows MCA litigation specifically, not a general commercial litigator, and you need them that day. Not next week. The longer the freeze sits, the more damage compounds — bounced payroll, bounced rent, lost vendor relationships, customer chargebacks. A week of frozen accounts can end a business that would’ve survived the underlying lawsuit.

8. The strongest defense is before the lawsuit, not after.

By the time a prejudgment remedy hits, your options are narrow, expensive, and mostly reactive. The real leverage point is the 30 to 60 day window before the funder files. Funders don’t want to litigate. Litigation costs them money, and most MCA portfolios are priced assuming a certain percentage of files get settled, not sued. If you’re in default, or heading there, the time to open a conversation about restructuring, settlement, or a forbearance is before the COJ gets filed and before the attachment papers get drafted. Once the freeze hits, the funder has all the leverage, and you’re negotiating from a position where you can’t make payroll. Before the freeze, you still have cards to play. After, you’re just trying to get your account unfrozen so you can keep the lights on.