Can an MCA Funder Freeze Your Account?
Yes, but not directly. The funder must first obtain a court judgment, then use that judgment to levy or restrain your bank account. This can happen faster than most business owners realize.
How It Happens
You default. The funder obtains a judgment through a COJ or default judgment. They serve a restraining notice on your bank. Your bank freezes the funds. You find out when your debit card is declined.
When This Typically Occurs
- Confession of judgment. The entire process from default to frozen account can take two to three weeks.
- Default judgment. If you were served with a lawsuit and did not answer.
- Post-judgment enforcement. If you failed to pay according to settlement terms.
What to Do If Your Account Is Frozen
- Contact an attorney immediately. You may have as little as 10 days to file objections.
- Determine the basis for the freeze.
- File a motion to vacate if applicable.
- Claim exemptions for protected funds.
- Open a new bank account to keep your business running.
Preventing Account Freezes
Respond to every legal filing immediately. If you know you are going to default, engage an attorney before the enforcement process begins.