Yes, but the funder will need to get a judgment against you personally, enter it in the state where the assets are, and have the clerk issue execution papers. You can claim exemptions before anything is taken.
This assumes a Pennsylvania owner whose MCA contract is governed by New York law and gives a New York court jurisdiction. See also: What personal assets can a MCA company take after a judgment against a guarantor?
What has to happen before a merchant cash advance company reaches personal assets?
| Step | What the funder files | Who issues it | What you receive | Your window |
|---|
| Judgment by New York suit | Summons and complaint, or a CPLR 3213 motion | Clerk on a default, judge on a motion | Summons, plus an extra mailed copy | 20 or 30 days to appear |
| Judgment by confession | Complaint in confession | Prothonotary | Notice before or with the writ | 30 days to petition to strike or open |
| Transfer to Pennsylvania | Certified copy and affidavit | Prothonotary | Notice the clerk mails | Ask for a stay |
| Execution | Praecipe for a writ | Prothonotary, served by the sheriff | Writ with a Rule 3252 exemption notice | Claim exemptions |
Can an MCA company take your personal money as soon as the business defaults?
Not immediately. The UCC-1 probably lists the business, not you, and the UCC does not allow a creditor to take your deposit account without an agreement with your bank (UCC 9-607). They can only take your personal money if they can hold you personally liable. See How can I be personally liable for an MCA debt that my business obtained? They must also be able to adjudicate you personally liable.
How does a funder get a judgment against you personally?
The MCA company can get a judgment against you by suing you or by confessing judgment. If they sue you, you have 20 days to appear after personal service (CPLR 320(a)). If they serve you in another way, you have 30 days. If you do not appear, the clerk can enter a default judgment for a sum certain without the judge. But only after the plaintiff mails an extra summons to your home at least 20 days before entry (CPLR 3215(g)(3)). The plaintiff can also serve a motion for summary judgment pursuant to CPLR 3213 with the summons instead of a complaint, but only in an action on an instrument for the payment of money. The court cannot hear it until 20 or 30 days after service, and you can file opposing papers on the merits. If the MCA company sues you in Pennsylvania, you have 20 days to answer, and before taking a default they must mail or deliver written notice of their intent at least 10 days before. This notice is not waivable (Rule 237.1). The interest rate on a New York judgment is 9% a year (CPLR 5004).
Since August 30, 2019, the MCA company can only confess judgment in New York in the county where you live when you signed or when they file (CPLR 3218(b)). Therefore, if you do not live in New York, they cannot. In Pennsylvania, which still allows commercial confessions, before executing, the funder must serve you with notice at least 30 days before, or serve it with the writ and hold a hearing within 3 business days (Rule 2959). You can file a petition to strike or open the judgment within 30 days after service.
Can a judgment from New York be used to seize assets in Pennsylvania?
Yes, by transferring the judgment to a Pennsylvania county under 42 Pa.C.S. 4306. The funder’s lawyer files a certified copy of the New York judgment with the prothonotary, and an affidavit stating that it is valid, enforceable and not satisfied. The clerk mails you notice, but there is no hearing. This is often an owner’s first notice of the New York lawsuit. Once transferred, it operates like a Pennsylvania judgment, although the judgment can be stayed by posting security while an appeal is pending.
It can lien real estate, or get writs to seize assets, only in the county where it is transferred. Real estate in two counties means two transfers.
Does a judge have to approve the seizure of your personal assets?
Usually no. The funder files a praecipe to request a writ to the sheriff, which can be served on anyone holding your property, like a bank. See Rule 3103 and Rule 3101. The writ must include a Rule 3252 notice explaining the general $300 exemption and that unless you go to court and establish an exemption, your property can be taken. Pennsylvania exemptions mostly must be claimed. Exemptions available to business owners targeted by MCA lenders are listed here.
A Sheriff Sale of real estate takes longer, because written notice must be given at least 30 days before the sale, plus 3 weeks of newspaper notice. See Rule 3129.2.
How long can a funder keep coming after your personal assets?
A judgment lien on real estate in Pennsylvania lasts for 5 years, but can be revived. Execution on personal property can issue within 20 years of entry (42 Pa.C.S. 5529). A judgment lien on real property in New York lasts 10 years. Each gate can be closed by answering the complaint, staying the transfer, claiming your exemptions, or negotiating a settlement which releases the guarantor and enters a satisfaction of judgment. Personal bankruptcy also stops enforcement of judgments, through the automatic stay in 11 U.S.C. 362.
Frequently Asked Questions
Can they confess judgment against me in New York if I live in Pennsylvania?
No, unless you lived in New York when the confession was signed or filed. The law changed on August 30, 2019. A business with a location in New York can still have judgment confessed against it in New York.
If the funder is suing the LLC, are my personal assets safe from the judgment?
Yes, although the complaint may be amended to include you as a guarantor, which will start the process described above.
Can the funder freeze my accounts before they win the case?
Only in limited circumstances. In New York, an attachment requires a court order, a statutory reason and the posting of a bond of at least $500. In Pennsylvania, prejudgment attachments were rescinded in 1989.
Should I move my assets to my spouse’s name or a new account?
Moving assets once you know that you are about to default is a “badge of fraud,” and an example of a voidable transfer under 12 Pa.C.S. 5104, and grounds for attachment in New York. It will not help your situation.