MCA Levy: What It Is, How It Happens, and How to Fight Back

An MCA levy is the seizure of funds from a business bank account after a merchant cash advance funder obtains a money judgment and takes steps to enforce it. By the time many business owners discover the problem, the account has already been frozen or the funds have already been taken.

Singer Law Group works with businesses anywhere in the United States on MCA issues. The business itself does not need to be located in New York. When Singer Law Group represents a business in an MCA lawsuit, that lawsuit must be filed in New York. The business involved in that New York lawsuit can be located anywhere in the country.

A levy is not necessarily the end of the road. Once a business discovers an account has been frozen or funds have been taken, it needs to review the judgment, the MCA agreement, and the enforcement record quickly to determine what options remain.

What Is an MCA Levy?

An MCA levy is a post-judgment enforcement action that allows funds to be seized from a business bank account to satisfy a money judgment obtained by a merchant cash advance funder.

Understanding the levy requires distinguishing two related but different enforcement tools.

A restraining notice can freeze funds in the account and prevent the bank from releasing them. A business owner may first learn of the restraint when a payment is declined, a payroll transfer fails, or the bank reports that the account has been restricted.

A levy, sometimes called an execution, is the step used to seize funds to satisfy the judgment. The restraining notice freezes the money. The levy is used to collect it.

This distinction matters when deciding what to do next. If the account has only been restrained, the situation differs from one where funds have already been transferred. Counsel needs to determine exactly what stage the enforcement has reached before deciding how to respond.

A confession of judgment (COJ) is another issue that can arise in MCA enforcement. Historically, it allowed certain funders to obtain judgments without first going through a traditional lawsuit. The rules surrounding confessions of judgment have changed, particularly for out-of-state businesses, but an existing COJ or judgment still needs to be examined carefully.

How Do MCA Funders Get the Right to Levy Your Account?

Before an MCA funder can levy an account based on a judgment, it first needs an enforceable money judgment. That judgment can come from a confession of judgment, a default judgment, or litigation between the parties.

The Confession of Judgment Fast Track and the 2019 Reform

Confessions of judgment historically gave MCA funders a much faster path to judgment than ordinary litigation.

New York changed its rules governing confessions of judgment in 2019, significantly restricting their use against out-of-state defendants. That reduced one route MCA funders had used against businesses outside New York.

It did not eliminate MCA litigation or judgment enforcement. Funders can still file lawsuits, obtain default judgments when defendants fail to respond, and pursue collection after obtaining an enforceable judgment.

Default Judgments: The More Common Path Today

When a business does not respond to an MCA lawsuit, the funder can seek a default judgment.

That is why you can't ignore court papers. A business owner who misses the lawsuit can lose the chance to raise defenses before judgment and may not realize how far the case has progressed until a bank account is restrained.

When New York Courts Matter for Businesses Outside New York

The business does not have to be located in New York for Singer Law Group to help with an MCA problem.

Singer works with businesses nationwide on MCA matters. If Singer is handling an MCA lawsuit, however, that lawsuit must be filed in New York. The business involved in the New York lawsuit can be located anywhere in the United States.

MCA agreements can also contain New York forum-selection and governing-law provisions. If litigation has been filed in New York, a business outside the state should not assume its location makes the lawsuit irrelevant.

What Happens During an MCA Bank Levy, Step by Step?

An MCA bank levy generally starts with a judgment and moves into post-judgment enforcement against the business's bank account.

Step 1: Judgment Is Entered

The funder first obtains a judgment. Depending on the case, that can result from a confession of judgment, a default after the business fails to respond to a lawsuit, or a judgment reached through litigation.

Before focusing on the levy itself, counsel needs to understand where the judgment came from and how it was entered.

Step 2: The Bank Account Is Restrained

After judgment, the funder can pursue enforcement against the business's bank account.

When the bank receives a valid restraint, funds can become unavailable to the business. The practical effect can be immediate. Payroll, rent, vendor payments, taxes, and ordinary operating expenses can all be affected.

Step 3: Funds Are Seized

A levy or execution can then be used to collect funds toward the judgment.

At this point, the first question is not simply how much money was taken. Counsel also needs to examine the underlying judgment, the MCA agreement, how the business was served, and whether there are grounds to challenge what happened.

The Role of UCC Liens in MCA Enforcement

MCA funders can also file UCC financing statements asserting security interests in business collateral, including receivables.

A UCC filing is not the same thing as a bank levy. However, it can create additional problems for a business trying to obtain financing, sell assets, or resolve its MCA obligations.

Any final resolution should address outstanding UCC filings where appropriate. Paying or settling the immediate levy does not necessarily answer what happens to the funder's UCC filing afterward.

Can an MCA Levy Be Stopped or Reversed?

A levy does not automatically mean there is nothing left to fight. Depending on how the judgment was entered and what the MCA agreement actually says, the business can still have legal and settlement options.

Motion to Vacate the Judgment

If the levy is based on a judgment, the judgment itself needs to be reviewed.

Was the business properly served? Did it know about the lawsuit? Was the judgment entered by default? Was a confession of judgment involved? Does the business have defenses it never had a chance to raise?

Those questions can determine whether there is a basis to ask the court to vacate the judgment. If a confession of judgment is involved, Singer Law Group's work fighting confessions of judgment in New York addresses that issue directly.

Timing matters. Once a business learns about a judgment or restraint, waiting can make the situation harder to fix.

Usury and Recharacterization Defenses

The label on the MCA agreement does not necessarily decide what the transaction was. The question is how the deal actually worked.

Did payments change when revenue changed? Could the business actually use reconciliation? Did the funder take a real risk if receivables dropped, or did the business still have to pay a fixed amount?

If the transaction functioned more like a loan and New York law applies, recharacterization and usury defenses can become part of the case. Those defenses can affect what the funder can enforce and can change the settlement discussion.

Negotiated Settlement After a Levy

A levy does not necessarily close the door on settlement.

If there are legitimate defenses to the judgment or the underlying MCA agreement, those issues can become part of the negotiation. The business can also negotiate over payment terms, the judgment, UCC filings, releases, and what the funder must do once the settlement is completed.

A settlement needs to resolve more than the immediate bank problem. The written agreement should clarify what happens to the judgment, any remaining balance, UCC filings, guaranties (where applicable), and the funder's enforcement rights.

Singer Law Group handles merchant cash advance settlement negotiations as part of a broader MCA defense strategy.

One warning: be careful about paying a debt settlement or consolidation company to handle a levy. Negotiating a payment is not the same thing as challenging a judgment, appearing in court, or raising legal defenses. The distinction matters most when the business is already dealing with litigation or judgment enforcement. MCA debt consolidation fraud can create another problem on top of the MCA debt the business already has.

Bankruptcy as a Levy Defense

Bankruptcy can also factor into the analysis when the MCA levy is part of a larger debt problem.

A bankruptcy filing generally triggers an automatic stay that stops covered collection activity while the case proceeds. For businesses that still have viable operations but need to reorganize debt, Chapter 11 bankruptcy or Subchapter V can provide a restructuring path.

Chapter 7 can be considered when there is no workable path to continue the business.

Bankruptcy is not always the first or best move. Before deciding, compare your MCA defenses, settlement options, cash flow, other creditors, personal guaranties, and restructuring needs.

What to Do Immediately If Your Account Has Been Levied

If you discover that a business account has been frozen or funds have been taken, find out who obtained the judgment, locate the court papers, and get the MCA agreement and enforcement documents in front of counsel as soon as possible.

How to Identify the Source of the Levy

Start with the bank.

Ask for the judgment creditor's name and any information the bank can provide about the judgment, restraint, or execution. If there is a court case, obtain the court and case information.

The goal is to learn what happened before assuming what defenses are available.

Get the Court Records

Once you identify the case, obtain the judgment, complaint, proof of service, MCA agreement, and relevant motion papers.

Those documents can answer some of the most important questions: Was the business properly served? Was the judgment entered by default? Was a confession of judgment involved? What did the MCA agreement actually require? Was reconciliation available? What did the funder claim constituted default?

The paperwork comes first.

The Six-Step Action Plan

1. Identify the judgment creditor and court. Get the available judgment and case information from the bank.
2. Pull the court documents. Obtain the judgment, complaint, MCA agreement, proof of service, and relevant filings.
3. Assess grounds to challenge the judgment. Determine how the judgment was entered and whether legal grounds exist to attack it.
4. Evaluate usury and recharacterization defenses. Look at how the MCA actually operated, including reconciliation, payment structure, and risk.
5. Negotiate or litigate. Use the facts and available defenses to decide whether settlement, motion practice, or another strategy makes sense.
6. Resolve outstanding UCC filings. Make sure any final deal addresses UCC terminations or other lien issues where appropriate.

Common Mistakes to Avoid

• Waiting to find out what happened. If an account is frozen or funds have been taken, get the judgment and court papers immediately. Delay can reduce the options available.
• Assuming the business is protected because it is outside New York. A company does not have to be located in New York to face an MCA problem connected to New York litigation. Singer Law Group works with businesses throughout the United States on MCA matters. When Singer handles an MCA lawsuit, the lawsuit must be filed in New York, but the business itself can be located anywhere in the country.
• Contacting the MCA funder before reviewing the case with counsel. Before explaining what happened, find out what the agreement says, how the judgment was entered, and what defenses exist. An off-the-cuff explanation can create problems later.
• Paying a debt consolidation company to handle a legal enforcement problem. A company negotiating payments is not the same as an attorney who can challenge a judgment or represent the business in litigation. Be especially careful when someone promises to stop enforcement without first reviewing the court record.
• Filing bankruptcy before comparing the other options. Bankruptcy can be a powerful restructuring tool, but the business should first understand its defenses, settlement options, other debts, and cash flow. The filing should follow the analysis, not replace it.
• Ignoring outstanding UCC filings after the levy is resolved. Fixing the immediate bank problem does not necessarily terminate a UCC filing. Any final resolution should address what happens to those filings and any remaining security interests.

Why MCA Levy Cases Require New York MCA Defense Counsel

When an MCA levy arises from a New York lawsuit or judgment, the defense requires counsel who understands New York MCA litigation, judgment enforcement, recharacterization, usury issues, and the restructuring options available if the business has a larger debt problem.

The levy is only one part of the case. Counsel needs to determine how the judgment was entered, whether the business was properly served, what the MCA agreement actually required, whether recharacterization or other defenses exist, what UCC rights the funder claims, and whether settlement or restructuring makes more sense than continued litigation.

The national reach of MCA financing means the business itself does not need to be in New York. J. Singer Law Group works with businesses located anywhere in the United States on MCA issues. When the firm represents a business in an MCA lawsuit, that lawsuit must be filed in New York. The business involved can be located anywhere in the country.

Jeb Singer, Managing Partner of J. Singer Law Group, previously clerked for Judge Stuart M. Bernstein in the U.S. Bankruptcy Court for the Southern District of New York. That bankruptcy and restructuring background matters when the question is not only how to respond to the levy, but whether the company needs a broader solution to its MCA and business debt.

Singer Law Group's merchant cash advance defense practice addresses MCA lawsuits, judgments, levies, UCC issues, settlement, and restructuring.

If your business account has been frozen or levied by an MCA funder, contact J. Singer Law Group at (917) 905-8280. Gather the judgment, MCA agreement, and bank paperwork before making your next move.

Frequently Asked Questions

What is an MCA levy?

An MCA levy is a post-judgment enforcement action that seizes funds from a business bank account to satisfy a judgment obtained by a merchant cash advance funder.

A restraining notice can freeze funds first. A levy or execution then collects funds toward the judgment. If your account has been affected, first determine what judgment exists and how it was entered.

Can an MCA company freeze my bank account without warning?

A business can discover an account restraint without the bank giving warning.

If that happens, find out immediately who obtained the judgment, what court case is involved, and what legal process was served on the bank. Do not assume the freeze itself tells you whether the underlying judgment is valid or whether it can be challenged.

My business is not in New York. Can a New York MCA lawsuit still affect my accounts?

Yes. A business outside New York can still be involved in an MCA dispute connected to a New York lawsuit or judgment.

Singer Law Group works with businesses anywhere in the United States on MCA issues. If Singer represents the business in an MCA lawsuit, that lawsuit must be filed in New York. The business itself can be located anywhere in the country.

If your company receives papers from a New York court, do not ignore them simply because the company operates elsewhere.

What is the difference between a restraining notice and a levy?

A restraining notice freezes funds and prevents the bank from releasing them. A levy, or execution, seizes funds to satisfy the judgment.

The difference matters because your response may depend on whether the money is merely restrained or has already been transferred.

Can I stop or reverse an MCA levy after it has already happened?

Potentially. The available options depend on how the judgment was entered, whether service was proper, what defenses exist under the MCA agreement, and what enforcement has already occurred.

If the agreement operated more like a loan than a genuine purchase of receivables and New York law applies, recharacterization and usury defenses can become part of the case. Settlement can also remain possible after enforcement begins.

If the company has several MCA obligations or broader financial problems, you can also evaluate bankruptcy alongside litigation and settlement.

The key is to get the judgment, MCA agreement, bank records, and court papers reviewed quickly.

Does the 2019 confession of judgment reform protect me from an MCA levy?

The 2019 changes significantly restricted the use of New York confessions of judgment against out-of-state defendants, but they did not eliminate MCA lawsuits or judgment enforcement.

A funder can still file a lawsuit and seek a judgment through ordinary litigation. If the business fails to respond and a default judgment is entered, the funder can then pursue available enforcement remedies.

That is why a business outside New York should never assume it can ignore New York court papers.

An MCA Levy Is an Enforcement Problem, Not Just a Banking Problem

When a business account is frozen, or money disappears from the account, the immediate reaction is usually to focus on getting access to the cash.

That is only part of the problem.

The real questions are how the funder obtained the judgment, whether the business was properly served, what the MCA agreement says, whether the funder has the rights it claims, and whether the business has defenses it never raised.

Do not start by negotiating with the funder. Start with the judgment, the MCA agreement, the court record, and the bank paperwork. Then decide whether to challenge the judgment, negotiate a settlement, address UCC filings, restructure the MCA debt, or consider bankruptcy.

Singer Law Group works with businesses anywhere in the United States on MCA issues. If Singer is handling an MCA lawsuit, that lawsuit must be filed in New York. The business involved in that New York lawsuit can be located anywhere in the United States.

If an MCA funder has frozen or levied your business account, or you have discovered a New York judgment you did not know existed, call J. Singer Law Group at (917) 905-8280. The sooner we review the documents, the sooner you can determine what options are actually available.