MCA default judgment: can you vacate it

Yes, sometimes. But the window is narrow, the standard is high, and most business owners wait too long to even try. If a New York court entered a default judgment against you on an MCA, you have a legal path to vacate it — but you need to move fast, and you need an actual argument, not just “I didn’t know.”

If you’re reading this because you just found out there’s a judgment against you, keep reading before you do anything.

What is an MCA default judgment

When you stopped paying your MCA, and ignored the lawsuit papers, or never got served properly, the funder went to court, and asked the judge to enter a judgment against you without a fight. That’s a default judgment. It means you lost, without ever showing up.

Most MCA lawsuits are filed in New York — specifically, in New York Supreme Court, usually in counties like Orange, Erie, or Westchester. The reason is simple: the MCA agreement you signed has a forum selection clause, and a confession of judgment clause, or something close to it. You agreed to be sued in New York. You agreed to fast enforcement.

Once the judgment is entered, the funder can:

• Freeze your personal and business bank accounts
• Garnish receivables from your customers
• Place liens on property
• Domesticate the judgment in your home state, and enforce it there

This happens within days. Not weeks.

Can you vacate a default judgment on an MCA?

Yes — but you need a legal basis. You can’t just ask the court to undo it because you’re upset, or because the amount is large, or because the business is struggling. Under New York CPLR 5015, you vacate a default judgment by showing one of the following:

• Excusable default — you had a reasonable excuse for not appearing, AND a meritorious defense
• Lack of personal jurisdiction — you were never properly served
• Fraud, misrepresentation, or misconduct — by the other side
• Newly discovered evidence — that would’ve changed the outcome
• The judgment is void — for some procedural reason

The two most common paths, in MCA cases, are improper service, and excusable default with a meritorious defense. Let’s take each one.

Path 1: You were never properly served

This is the strongest argument, when it’s real. MCA funders use process servers, and some of those process servers are sloppy. Some are worse than sloppy. “Sewer service” — where the server files an affidavit claiming they served you, but never actually did — is a documented problem in New York courts.

If you can show:

• The affidavit of service describes a person who doesn’t exist at the address
• You weren’t at the address on the date claimed
• The description of the person served (height, weight, age) doesn’t match anyone in your household or business
• The address itself is wrong, or you’d moved before the service date

— you have a real shot at vacating.

Here’s the thing most business owners don’t realize: improper service isn’t just a reasonable excuse. It makes the judgment void. You don’t have to prove a meritorious defense in the same way. The court had no jurisdiction over you to begin with.

Path 2: Excusable default with a meritorious defense

This is harder. You’re admitting you were served, but asking the court to forgive the default because you had a reasonable excuse, and you have a real defense to the underlying claim.

Reasonable excuses that sometimes work:

• You were in the hospital, or had a medical emergency
• A family member died
• The papers went to your old accountant, or old attorney, who didn’t forward them
• You were actively negotiating with the funder, and they told you not to worry about the lawsuit (this one is powerful, if you have it in writing)

Excuses that don’t work:

• “I was too busy”
• “I didn’t understand the papers”
• “I thought my lawyer was handling it” (unless you can prove it)
• “I didn’t have the money to hire a lawyer”

The meritorious defense side is where MCA cases get interesting. In New York, courts have increasingly ruled that some MCAs are actually disguised loans, which would make them usurious, and void. The factors courts look at — called the McNider factors, and refined in cases like Adar Bays v. GeneSYS — include:

• Whether the reconciliation provision is real, or illusory
• Whether the funder has recourse in the event of good-faith business failure
• Whether the term is indefinite, or fixed
• Whether the percentage of receivables is a genuine percentage, or a disguised fixed payment

If your MCA has a weak reconciliation provision, and the funder treated it as a fixed-payment loan, you may have a usury defense. That is a meritorious defense. That can get a judgment vacated.

How fast do you have to move?

One year. Under CPLR 5015(a)(1), you have one year from the date you received notice of the default judgment to move to vacate on excusable-default grounds.

Lack of jurisdiction — improper service — has no strict time limit, but courts get skeptical if you wait too long. If the funder has already collected on the judgment, frozen your accounts, and enforced for two years while you did nothing, your jurisdiction argument gets weaker. Not legally. Practically.

The faster you move, the better your odds. A motion filed within 30 days of discovery is treated very differently than one filed 11 months later.

What does the process actually look like

You (or your attorney) file an Order to Show Cause, which asks the court to temporarily stop enforcement, and to hear your motion to vacate. If the judge signs it, you get a stay — meaning the funder can’t continue collecting — while the motion is pending.

Then you brief it. The funder opposes. There may be a traverse hearing, if service is contested, where the process server has to testify. The judge decides.

If you win: the judgment is vacated. You go back to the original lawsuit, and you now get to defend it. The case isn’t over — but you’re no longer losing by default.

If you lose: the judgment stands, and enforcement resumes.

What this costs

Expect to pay a lawyer, anywhere from $3,500 to $15,000, to bring a motion to vacate, depending on the complexity, and whether a traverse hearing is needed. More, if it goes to appeal.

Expensive? Yes. Compared to a $200,000 judgment accruing 9% statutory interest, and freezing every account you have — it’s a fraction.

What you should not do

• Do not call the MCA funder, and admit anything. Anything you say can be used against you in opposing the motion.
• Do not transfer assets, or move money around, to hide from the judgment. That is fraudulent conveyance, and it’s a separate problem — sometimes criminal.
• Do not wait to see if it goes away. It doesn’t.
• Do not file pro se, unless you absolutely cannot afford counsel. MCA funder attorneys do this every day. You don’t.

When vacating isn’t the right move

Sometimes, even if you could vacate the judgment, you shouldn’t. If the underlying debt is real, the MCA is clearly enforceable, and you don’t have a meritorious defense — vacating just resets the clock, and you lose again six months later, with more fees.