It’s likely that your MCA or cash advance funder is going to sue you in New York and then file the judgment in your circuit court, then pursue liens and garnishment against you as guarantor. (As a guarantor in Alabama, you have low exemptions.) Look for a company that negotiates at every stage and works with counsel licensed in New York and Alabama.
To find out what they charge, read what business debt settlement costs, then come back for Alabama.
Why can't an MCA funder just confess judgment against an Alabama business?
First, Alabama has voided confessions of judgment for over a century. The law is Ala. Code 8-9-11. It has been in the code since at least the Code of 1907: any agreement to confess judgment before the action begins is void, and a judgment obtained that way will be set aside on a motion filed within six (6) months after entry.
Second, since August 30, 2019, a New York confession of judgment may only be filed in the county where the defendant resided when it was signed or resides when it is filed. See CPLR 3218(b). A business “resides” where it has a place of business. So an Alabama business without a New York location is safe there too. (If your company does keep a New York office, that protection may not apply.) See our confession of judgment explainer.
How does a New York judgment end up being enforced in Alabama?
They can use the forum selection clause in your contract to sue you in New York, take a default judgment or summary judgment and file it in any circuit court in Alabama pursuant to the Uniform Enforcement of Foreign Judgments Act, found in Ala. Code 6-9-230 to 6-9-238. They choose the county, and once filed it has the same effect as a judgment issued by the circuit court.
Federal law requires full faith and credit to a sister state judgment where that court had jurisdiction. See 28 U.S.C. 1738. The Supreme Court has held that there is no “roving” public policy exception to the Full Faith and Credit principle. See Baker v. General Motors, 522 U.S. 222. So a New York judgment will likely be “domesticated” in Alabama, which is why the first stage is where you negotiate.
Once the judgment is filed here, the clerk mails notice to the defendant at the address provided in the creditor’s affidavit. If the creditor mails it and files proof of mailing, it can enforce the judgment. Also, they cannot get execution until 30 days after the filing of the foreign judgment. See 6-9-233(c). The clock runs from filing, not receipt, so don’t ignore the mail. They can also record it at the probate office in any county where you own real property, creating a ten (10) year lien there. See Ala. Code 6-9-211 and 6-9-237.
What can they take from me as a guarantor in Alabama?
Quite a lot. The chart below reflects the State Treasurer of Alabama’s adjustment of the exemptions effective April 1, 2024, as published by the United States Bankruptcy Court for the Southern District of Alabama.
| Protection | Current figure | Statute |
|---|
| Homestead (most owners) | $18,800, up to 160 acres | Ala. Code 6-10-2, 6-10-12 |
| Homestead, age 62+ or disabled | $56,400, for debts created after Act 2026-203 | Ala. Code 6-10-2, 6-10-1 |
| Personal property, including bank balances | $9,400, claimed in writing before condemnation | Ala. Code 6-10-6, 6-10-37 |
| Wages | 75% exempt, 25% reachable | Ala. Code 6-10-7 |
Your home can be sold if it has more than $18,800 in equity, but you get the $18,800 from the sale. See Ala. Code 6-10-38. Alabama has no statute providing for tenancy by the entirety. If you own the house jointly with a spouse who didn’t sign for the advance, each of you can claim a separate homestead exemption. However, your spouse must sign to voluntarily convey or mortgage property in Alabama. You must file the exemption claim for your bank account in writing and under oath prior to condemnation of the account or you lose the $9,400.
How should you vet business debt settlement companies in Alabama?
There is no license in Alabama and the Code’s table of contents shows no debt settlement, debt adjusting or commercial financing disclosure law. Check Secretary of State registration, Attorney General complaints, and the Bar standing of their lawyer. Then ask:
- Do they have a lawyer in New York to work with once a complaint is served and in Alabama once a judgment is filed?
- Do they know about the 30 days under 6-9-233(c) and 6-9-234 to get a stay?
- Can they help you file a claim of exemption in a timely manner once an account is garnished?
- Did they read the guaranty to make sure you didn’t waive your exemptions and create a security agreement on your business vehicle and tools?
Your business vehicle and tools are exempt from waiver unless pledged in a consensual security agreement, which many MCAs include (see 6-10-126). Also be wary of any provider that says they can use Alabama usury laws as they specifically state in 8-8-5 that usury cannot be asserted for any deal of $2,000 or more. Review Should I hire a Debt Settlement Company or Law Firm for MCA Debt? to learn why a non-lawyer cannot appear for you in court. Neighboring owners can read Best Business Debt Settlement Companies in Mississippi.
Frequently Asked Questions
Did I give up my Alabama exemptions when I signed my MCA contract?
It’s possible that you gave up your personal property exemption since it can be waived by note or other written contract. However, a homestead exemption can only be waived by a separate written instrument signed by you, witnessed and with the assent of your spouse if you are married. Even a waiver must be pleaded and stated in the judgment before they can levy on it.
I'm over 62. Does Alabama's new $56,400 homestead exemption protect me?
It will only help you for new debts created since Act 2026-203. Unless you file for bankruptcy, Alabama applies the exemption law in effect when the debt was created. So your guarantee is probably stuck with the old amount unless you file bankruptcy, where the petition date controls.
Can I use Alabama usury laws to throw out my merchant cash advance?
It’s very unlikely, since on any deal of $2,000 or more originally advanced the parties may agree to any rate and the borrower and guarantor can’t raise usury. Most MCAs exceed that, so a provider pitching usury is a bad sign.
Is there a license in Alabama for business debt settlement?
No, there is no law in Alabama for business debt settlement or disclosures on commercial financing.