Does a Personal Guarantee on an MCA Cover My House?

Quick answer: Not until the funder sues you personally and enters a money judgment in the county where your house sits. Even then, how title is held may protect the house from a forced sale.

Did signing a personal guarantee for my MCA put a lien on my house?

Unless something in your funding package was recorded at your county recorder of deeds, no. Signing a personal guaranty does not put a lien on your house. The UCC-1 your funder files is a lien on the business's receivables and other assets, not your house. Still, check that no mortgage was part of the package. On when a guaranty may not be enforceable, see Is a Personal Guarantee on a Merchant Cash Advance Enforceable?

How can a funder obtain a lien on my house in an MCA case?

Usually a funder has to sue you as a guarantor and have judgment entered in your county court of common pleas. Most MCAs pick New York courts, and a New York judgment must be filed in Pennsylvania before the funder can act on it. Once filed, 42 Pa.C.S. § 4306 makes the NY judgment treated like a PA judgment. If the guaranty has a confession of judgment clause, since 2019 it cannot be filed in New York against a non-resident under CPLR 3218(b). In Pennsylvania, however, the funder can file it at your county prothonotary's office and judgment is entered without advance notice or hearing under Pa.R.C.P. 2951. They must then serve you notice under Pa.R.C.P. 2964 and you have 30 days from service of notice to petition for relief.

Once entered, the judgment is a lien on your real property under 42 Pa.C.S. § 4303(a). A few things to note:

• Mortgages recorded before the judgment have priority under 42 Pa.C.S. § 8141, so the funder can only go after your equity.
• The judgment must be revived within 5 years under 42 Pa.C.S. § 5526(1).
• It will prevent you from selling or refinancing without paying it off.
• A forced sale requires a writ of execution and a sheriff sale, with at least 30 days written notice and publication once a week for 3 weeks under Pa.R.C.P. 3129.2.

So if your house is worth $400,000, with a $250,000 first mortgage and a $50,000 home equity line recorded before a $120,000 guarantor judgment, the funder is in third position and can at most get the $100,000 equity (less costs of sale) if it forces a sale.

Is there a homestead exemption in Pennsylvania to protect my house in an MCA case?

Unless you file for bankruptcy, there is no homestead exemption in Pennsylvania, even though some general articles cite the law in Florida or Texas. The list in 42 Pa.C.S. § 8124 has none, and the $300 general exemption is not worth much. In bankruptcy, there is a federal homestead exemption of $31,575 under 11 U.S.C. § 522(d)(1), plus a $1,675 wildcard and up to $15,800 of unused homestead exemption, and Section 522(f) lets you avoid the judicial lien to the extent it impairs an exemption. For other exemptions, see 5 Exemptions that can Protect Business Owners in Merchant Cash Advance Cases.

Is my house safe if I own it with my spouse?

If you and your spouse hold the house as tenants by the entireties and only you signed the guarantee, likely yes. Pennsylvania courts have held that a creditor of one spouse cannot execute on entireties property because the marital unit is not the debtor. See In re Drake (Bankr. E.D. Pa. 2004), citing Napotnik v. Equibank, 679 F.2d 316 (3d Cir. 1982), and Stauffer v. Stauffer, 465 Pa. 558 (1976). A deed to a married couple is presumed to create a tenancy by the entireties, but you must be married when title is taken, so a house bought before the marriage generally won't qualify.

What can cause entireties property to lose its protected status?

The most obvious cause is the end of your marriage. Per 23 Pa.C.S. § 3507, divorce turns the house into a tenancy in common in equal halves, and a lien attaches to your half. If your spouse dies first, the house is yours alone and a lien can attach to all of it. Moving a house you own alone into joint names after defaulting on the guarantee may be reversed under 12 Pa.C.S. § 5104. Finally, the Third Circuit in In re Titus (2019) found that an insolvent spouse's wages deposited into an entireties account were fraudulent transfers, leaving both spouses liable except for amounts spent on necessities.

What if my house is in New York?

New York puts a dollar cap on the home equity protected from a judgment creditor. The lien attaches when the judgment is "docketed" in the county where the house sits and lasts ten years under CPLR 5203. The homestead exemption, last updated April 1, 2024 per the New York Department of Financial Services, is $204,825 for NYC, Long Island, Rockland, Westchester, and Putnam Counties; $170,700 for Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster Counties; and $102,400 for the rest of the state. Out of date webpages show the statute's base amounts of $75,000 to $150,000.

Frequently Asked Questions

Can the funder attach a lien to my house if I already have a mortgage?

Yes, but under 42 Pa.C.S. § 8141 the lien is subordinate to mortgages recorded before the judgment, so the funder only gets the equity left after your mortgage and any prior HELOCs.

Can they force a sheriff sale of my house?

They can try, but they first need a writ of execution, an affidavit of all owners and lien holders, at least 30 days written notice, and newspaper publication for three consecutive weeks.

Can I transfer my house to my spouse's name now to protect the house?

Probably not. A transfer after you have defaulted or been threatened with a lawsuit may be reversed under Pennsylvania's voidable transactions statute, and the funder likely has four years to do so.

How long will the judgment lien be on my house?

In Pennsylvania, the lien must be revived within five years or it loses its hold on the property. New York's lasts ten years from filing and can be extended by motion.