In This Article
- 1.1. They Can Sue You Personally — Not Just the Business
- 2.2. A Confession of Judgment Can Skip the Trial Entirely
- 3.3. Your Personal Bank Accounts Can Be Frozen
- 4.4. Your Personal Assets Become Fair Game
- 5.5. Your Spouse's Joint Accounts and Joint Assets Are Exposed
- 6.6. The Guarantee Survives Bankruptcy — Sometimes
You signed a personal guarantee on your MCA. Most business owners did. And most business owners didn't read it, or didn't fully understand what it meant when they signed it. That's not a judgment, it's a fact — the MCA industry moves fast, the money hits your account in 24 to 48 hours, and nobody's sitting there with a magnifying glass reading page 9 of a funding agreement when they need capital to make payroll.
But here's the problem: that personal guarantee fundamentally changes what happens to you when the MCA goes into default. Not your business. You.
Short answer: a personal guarantee means the funder doesn't have to stop at your business assets. They can come after your personal bank accounts, your home equity, your car, your savings — anything with your name on it. And they will. The MCA isn't a handshake. The personal guarantee turns a business debt into a personal liability, and that distinction is the difference between losing a business and losing everything.
Here are the 6 ways it changes your exposure.
11. They Can Sue You Personally — Not Just the Business
Without a personal guarantee, the MCA funder's recourse is limited to the business entity. They can go after business assets, receivables, the merchant account. That's it.
With a personal guarantee, you are individually liable. The funder can file a lawsuit against you, by name, in addition to the business. This means a judgment against you, not just your LLC or your corp. And if you're thinking "but I formed an LLC specifically to protect myself" — the personal guarantee is the document that pierces that protection. You signed it away. Voluntarily.
Most business owners don't realize this until the lawsuit shows up.
22. A Confession of Judgment Can Skip the Trial Entirely
This is the one that catches people off guard. Many MCA agreements (especially those governed by New York law) include a confession of judgment — sometimes called a COJ — as part of the personal guarantee.
What this means: the funder doesn't have to sue you and wait for a trial. They already have a signed document where you agreed, in advance, to let them obtain a judgment against you without a court hearing. They file the COJ with the court, the clerk enters the judgment, and now there's a legal judgment against you personally. No notice. No hearing. No opportunity to argue your side.
Some states have restricted or banned COJs (New York banned them for out-of-state borrowers in 2019). But many MCA agreements still include them, and if you're in a state where they're enforceable, you can have a judgment entered against you within days of default. Not weeks. Days.
33. Your Personal Bank Accounts Can Be Frozen
Once there's a judgment — whether through a COJ or a lawsuit — the funder can get a restraining order on your personal bank accounts. Not your business accounts. Your personal ones.
This is the one that breaks people. You wake up one morning, your debit card doesn't work, you can't pay your mortgage, you can't buy groceries. The account is frozen. The funds are being held pending a turnover order to the funder.
And because MCA funders move fast (most use specialized collection attorneys who do this every single day), the freeze can happen within 24 to 72 hours of the judgment being entered. There's no 30 day warning. There's no courtesy call. It just happens.
44. Your Personal Assets Become Fair Game
A personal guarantee expands the funder's recovery pool from "whatever the business owns" to "whatever you own." That includes:
Real estate (your home, investment properties, vacation properties)
Vehicles
Personal savings and investment accounts
Tax refunds
Any other non-exempt assets in your name
The funder can place liens against your personal property. In practice, this means they can attach a lien to your house. They probably won't force a sale (that's expensive and slow), but the lien sits there — and you can't sell or refinance that property until it's resolved. It becomes leverage. And funders know this, it's one of the most effective pressure tools they have.
55. Your Spouse's Joint Accounts and Joint Assets Are Exposed
This is the one nobody talks about until it's too late. If you have joint bank accounts with your spouse, those accounts are exposed to a judgment arising from your personal guarantee. The funder doesn't care that half the money in that account is your wife's paycheck. They'll freeze the whole thing and let you argue about it later.
Joint assets — including jointly owned property — can also be affected. The specifics depend on your state (community property states like California, Texas, and Arizona work differently than common law states), but the exposure is real. Your MCA default can directly impact someone who never signed anything, never saw the agreement, and had nothing to do with the business.
And if your spouse co-signed the personal guarantee (some funders require this), then they're individually liable too. Same exposure, same lawsuits, same frozen accounts.
66. The Guarantee Survives Bankruptcy — Sometimes
Most business owners assume that filing for bankruptcy wipes the slate clean. And for the business entity, it often does. But the personal guarantee creates a separate obligation, and that obligation doesn't automatically disappear when the business files Chapter 7 or Chapter 11.
Here's where it gets complicated: if you file personal bankruptcy (Chapter 7 or Chapter 13), the personal guarantee can be discharged — but only if the court allows it, and only if the funder doesn't successfully argue that the debt was obtained through fraud or misrepresentation. Remember that clause in the MCA agreement about misrepresentations in your application? If the funder can show you inflated revenue, submitted altered bank statements, or made material misrepresentations, they can argue the debt is non-dischargeable. And they do argue this. Frequently.
So the personal guarantee doesn't just follow you through default. It can follow you through bankruptcy. It can follow you into the next chapter of your life, sitting there like a lien on your future until it's dealt with.
The personal guarantee is the single most consequential document in your MCA agreement, and it's the one most business owners skip over. If you signed one — and statistically, you almost certainly did — your default exposure isn't limited to the business. It's personal. It's immediate. And it's broader than you think.
If you're already in default, or you're about to be, you need to understand exactly what your personal guarantee says before you make your next move. Not after.