MCA Default Judgment: Can You Vacate It?

A default judgment means the MCA lender sued you, and you didn't respond. That's it. You didn't file an answer, you didn't show up, you didn't have an attorney respond on your behalf, and the court gave the lender everything they asked for. The full balance. Attorney fees. Interest. Everything.

Here's the part that makes most business owners furious — you probably didn't even know you were sued. And that's not an accident, that's the system working exactly the way the MCA lender designed it to work.

Most MCA agreements contain a confession of judgment clause (COJ). If you signed your MCA in New York, or your agreement has a New York choice-of-law provision, this is almost certainly in your contract. A confession of judgment means the lender doesn't have to serve you with a lawsuit in the normal way. They take the affidavit you signed at closing, walk it into a New York county clerk's office, and the clerk enters judgment. No hearing. No notice. No opportunity to defend yourself.

You find out when your bank account is frozen. Or when a marshal shows up. That's how most people learn they have a default judgment against them.

Yes. But you need to understand what "vacate" means in legal terms. Vacating a judgment doesn't mean the debt goes away. It means the court throws out the judgment and gives you the chance to actually fight the case on the merits. You get to respond, raise defenses, and force the lender to prove their case.

Under CPLR 5015 (New York's Civil Practice Law and Rules), there are specific grounds to vacate a default judgment. The most common ones that apply in MCA cases:

Lack of proper service. If you were never properly served with the summons and complaint, the court didn't have jurisdiction over you in the first place. This is the strongest ground and it comes up constantly in MCA cases, because many lenders use confession of judgment clauses to skip service entirely.

Excusable default. You had a reasonable excuse for not responding, and you have a meritorious defense to the underlying claim. Courts look at both prongs — you can't just say "I didn't know." You need to show why you didn't know, and what your defense would be if given the chance.

Fraud, misrepresentation, or misconduct. If the lender obtained the judgment through deceptive means, this is grounds for vacatur. And in the MCA world, this comes up more than you'd think.

Here's where it gets interesting. In 2019, New York amended its laws on confessions of judgment. If your MCA was executed after August 30, 2019, confessions of judgment entered by out-of-state debtors are now void. Completely unenforceable.

That's not a technicality, that's a nuclear defense. If you're a business owner in Florida, Texas, California, anywhere outside New York, and the lender used a COJ to get a judgment against you after that date, that judgment should not exist. Period.

Even for pre-2019 COJs, the amendments created new procedural requirements that many lenders didn't follow. Defective affidavits, missing purchase agreements, failure to properly identify the debtor — these are all grounds to challenge the judgment.

If you're doing research on this you've probably seen references to the New York AG's settlement with Yellowstone Capital and Delta Bridge. That case matters because the AG's office specifically found that certain MCA practices, including the abuse of confessions of judgment, constituted fraud. The settlement didn't just punish those specific funders, it put the entire industry on notice.

If your lender used similar tactics to the ones outlined in that settlement — taking COJs from out-of-state borrowers, filing them without proper notice, freezing accounts without adequate basis — you have a roadmap for challenging your judgment.

Most business owners don't just have a judgment against them. They have a restraining notice under CPLR 5222 freezing their bank accounts. This is the thing that actually cripples your business, not the judgment itself, the restraining notice.

Here's what people don't realize: under CPLR 5222-a, there are specific exemption claims you can file to release funds that are protected. Certain amounts in your account may be exempt from restraint. You have the right to claim those exemptions, and the bank is required to provide you with an exemption claim form.

Most business owners don't claim exemptions because nobody tells them they can. The lender certainly won't. Your bank might send you a form buried in a stack of legal notices, but they're not going to walk you through it.

If you want to vacate a default judgment, time is not on your side. Here's what you're working against:

The longer the judgment sits, the harder it becomes to argue excusable default. Courts want to know why you didn't act sooner. "I didn't know" works for 30 days. It gets weaker at 60. By 6 months, you need a very compelling reason.

While you're figuring out your next move, the lender is enforcing. Bank levies, wage garnishments if there's a personal guarantee, UCC lien enforcement against your receivables. Every day you wait, money is leaving your ecosystem and going to the funder.

The judgment also accrues interest. In New York, the statutory rate is 9% per year. On a $200,000 judgment, that's $18,000 a year in interest alone, on top of the balance, on top of the attorney fees they tacked on.

This is the defense that's quietly reshaping MCA litigation. If the MCA agreement is structured in a way that functions like a loan, not a purchase of future receivables, it can be reclassified as a loan. And if it's a loan, it's subject to usury laws, lending regulations, and licensing requirements that MCA funders almost never comply with.

Courts look at three factors: whether there's a reconciliation provision (does the daily payment actually adjust based on your revenue), whether there's a fixed repayment amount regardless of receivables, and whether the funder has actual recourse against you personally if the business fails.

If the answer to these questions suggests it's a loan disguised as an MCA, the entire agreement may be void or unenforceable. That's not just a defense to the judgment, that's a defense to the debt itself.

If you have a default judgment against you from an MCA lender, here's what the next 48 hours need to look like:

Don't ignore it. This is the single biggest mistake. Every day you wait, the enforcement gets worse and your legal options get narrower.

Pull the judgment. Go to the county clerk's website (most likely New York County or Westchester) and get a copy of the judgment, the affidavit, and the underlying agreement. You need to see exactly what was filed and when.

Check the date of your MCA agreement. If it was executed after August 30, 2019, and you're an out-of-state borrower, the COJ may be void under the 2019 amendments. That's your fastest path to vacatur.

Look at the original agreement for a reconciliation clause. If there isn't one, or if one exists but was never actually honored, you may have a reclassification defense.

Talk to an attorney who actually handles MCA defense. Not a general business attorney, not your cousin who does real estate closings. Someone who knows CPLR 5015, the COJ amendments, and the three-factor test. This area of law is specific enough that general practitioners miss the defenses that matter.

The judgment isn't the end of the story. For a lot of business owners, it's actually the beginning of the fight, because now you know exactly what you're dealing with, and there are real legal tools to push back. But only if you move.