Yes, you can settle a merchant cash advance even after a judgment has been entered. The funder can accept less than the full amount and file a satisfaction that ends the judgment.
Can you settle an MCA judgment for less than the full amount?
Yes, you can settle for less than the full amount. In New York, CPLR 5020(a) requires a person entitled to enforce a judgment who receives satisfaction or partial satisfaction to file a satisfaction-piece or partial satisfaction-piece with the clerk. Similarly in Pennsylvania, 42 Pa.C.S. 8104(a) provides that a satisfaction entered by the person in whose favor the judgment was recovered “shall forever discharge the judgment.”
Some websites state that you must first get the judgment vacated before you can settle. That is not true, although you can make vacatur part of the settlement. To settle before a judgment is entered, see our post on settling after the funder has sued you but before a judgment is entered.
Why Would the Funder Settle After They Have Obtained a Judgment?
The funder can use a judgment to freeze your bank account for a year in New York using a restraining notice including new deposits. They can also levy on an entity's account, and the bank must send the money forthwith to the sheriff. There are essentially no exemptions for business bank accounts, as the exemptions in New York only apply to natural persons and the $300 exemption in Pennsylvania does not apply to entities. Once the funders levy, they know how much more they can get from you.
Other factors that affect the price:
- whether there are any assets you can be chased for by the funder, especially if you were added as a guarantor;
- whether there are multiple funders that have already levied on your bank account, in which case they are paid in the order of delivery of the execution to the sheriff (under CPLR 5234(b)); and
- whether you may consider filing for bankruptcy in the future, in which case payments or levies within 90 days before filing, while you were insolvent, can be clawed back as a preference under 11 U.S.C. 547 (the minimum non-consumer debt amount is $8,575.00 as of April 1, 2025).
Start negotiating early, because in New York, judgments accrue interest at a rate of 9% per year, and the lower rate of 2% only applies to consumers, not to judgments for entities such as for MCAs (CPLR 5004). On an $80,000 judgment, waiting 6 months to negotiate adds about $3,600 in simple interest. The funders have no such urgency, since a New York money judgment is not presumed paid for 20 years.
Practitioners have stated that settlements on an entered judgment typically run approximately 50-75% of the judgment, and less if the judgment has been sold to a debt buyer, although there is no publicly available data.
What paperwork actually ends a settled judgment?
You need a satisfaction of judgment, and you also need a release of any steps that have been taken to enforce the judgment. Your written settlement agreement should cover:
| What do you need? | New York | Pennsylvania |
|---|
| Satisfaction of Judgment | Funder files a satisfaction-piece with the Clerk and mails you a copy within 10 days of filing (CPLR 5020(a)); partial satisfaction-pieces for installment deals. | Funder must enter a satisfaction on your written request (42 Pa.C.S. 8104). |
| Release of frozen accounts | Funder's attorneys send a release letter to each bank served with a restraining notice. | Plaintiff sends the sheriff a written direction to stay execution (Pa.R.C.P. 3121(a)(1)). |
| Other docketings | Funder files a clerk's certificate of satisfaction in each other county where the judgment was docketed (CPLR 5020(d)). | A New York judgment domesticated in Pennsylvania needs a separate Pennsylvania satisfaction. |
Also ask:
- If the funder already levied and froze your account, will they credit the monies held by the Sheriff/Marshal on the outstanding executions?
- Who pays those costs?
- Will they file a UCC-3 (if applicable) to terminate their lien at the end of the agreement?
- Will they release you when you sign or at the end?
In Pennsylvania a garnishee judgment (which is a judgment against your bank) cannot be entered for 20 days after service, so you have some time to get this signed before they take your frozen monies.
What if the funder takes your money and never files the satisfaction?
You have remedies in both states. In New York, if the creditor fails to file the satisfaction of judgment within 20 days after it has been fully satisfied, the court can award you $100 (judgment under $5,000) or $500 ($5,000 or more) under CPLR 5020(c). CPLR 5021(a)(2) also lets you ask a court to enter satisfaction if the creditor won't give it to you.
In Pennsylvania the damages are greater. If you send the judgment creditor a letter asking for a satisfaction of judgment and they, willfully and without reasonable cause, fail to file it within 90 days, you can recover 1% of the original judgment for each month past the 90th day (minimum $250, maximum $2,500). Send it in writing and keep proof of when it was sent.
Will you owe tax on the forgiven amount?
Probably, unless an exclusion applies. Under 26 U.S.C. 108, you will be considered to have income equal to the amount of the debt which was canceled. Some exclusions are bankruptcy and insolvency (calculated right before the debt was discharged). If you are an LLC taxed as a partnership, you must calculate insolvency at the partner level. Even if you don’t get a 1099-C, the IRS says in Publication 4681 that the debt must still be reported. Review this with your CPA before you sign.
Frequently Asked Questions
Do I have to get the judgment vacated before I can settle?
No. A satisfaction of judgment terminates their right to collect. Vacatur would take the judgment off the docket, and you may be able to get it as part of your deal, but no statute requires it before you settle.
Does money the funder already took from my account count toward the settlement?
Make sure this is in your written agreement. Money collected by the Sheriff/Marshal and money still held in your frozen account are likely in different places, so address both.
What if I pay in installments and miss one?
Review the default terms closely. Funders often require a new confession of judgment or a stipulated judgment for the full amount, which lets them resume enforcement if you miss a payment.
The judgment names me personally as guarantor. Does the settlement cover me?
Make sure that the satisfaction of judgment and release refer to both defendants if judgment was obtained against both the LLC and the individual guarantor.