If you stop paying your merchant cash advance, the MCA funder will know within two banking days. If your agreement calls a bounced payment a “default,” the funder can declare the entire amount due. It will then likely file a Confession of Judgment, which can mean a judgment within days, or sue, which can mean a default judgment in 5-9 weeks.
For the first two weeks, read what happens if I stop paying my MCA.
How soon will my MCA funder know I stopped paying?
Debits returned for insufficient funds (R01) or a stop payment (R08) come back within a two-banking-day return window. If you block the debit on your business account, the bank returns it as “unauthorized” (R29), and Nacha’s rules give the bank the same two banking days.
Check your agreement for a reconciliation right. In one filed MCA Agreement, the funder had two business days to respond and had to stop debiting meanwhile. In Apollo Funding Co. v. Dave Reilly Construction (2025), a New York appeals court ruled for the funder partly because the merchant never asked. See our 5 letters to send before you stop paying your MCA.
Is a bounced check considered a default on my MCA?
Read your MCA agreement, because no statute governs grace periods to pay an MCA, and some agreements list a single missed payment as a default. In Oakshire, two ACH debits rejected in one month were a “default,” and the funder accelerated and filed a Confession of Judgment without notice. The sample agreement above charged a $50.00 “rejected ACH debit fee” and a $2,500.00 “default fee,” and others charge a “blocked account fee” of $5,000.00 or 25% of the balance.
The funder will also contact you personally, since most agreements include a personal guaranty (also known as a “performance guaranty”), and New York courts have held MCA merchants personally liable for the entire amount once they block the debit. The FDCPA only applies to “consumer debt,” so it does not cover MCA collections outside California’s narrow SB 1286 exception.
When will my MCA funder make the entire amount due?
The funder must send a notice declaring you in default and accelerating the amount due. New York has no statutory waiting period, though your agreement may set one. Once accelerated, the entire unpaid “purchased amount” is due along with the “default fees.” Under an insecurity or “material adverse change” clause, UCC 1-309 requires it to believe in good faith that payment will be impaired.
After default, the funder can tell your customers and card processor to pay it directly, which UCC 9-607(a) allows “in any event after default” without a court order. But the funder cannot freeze your bank account by sending a notice.
What happens if I stop paying a merchant cash advance that has a confession of judgment?
If the funder can file a Confession of Judgment, it can obtain a Judgment the day it files, without a lawsuit. In New York, CPLR 3218 allows entry “without an action,” but only in the County where you had a place of business when you signed or have one when it is filed. Execution is limited to sums due, so acceleration comes first. In Oakshire, the funder filed two days after refusing the merchant’s reconciliation request. The funder’s attorney can then restrain your bank account without going back to court.
In Pennsylvania, commercial confessed judgments also need no court permission, but the funder must either give you 30 days notice before executing (Rule 2958.1) or execute and give you a hearing within three business days (Rule 2958.3). You have 30 days to petition to strike or open it. Confessions of Judgment are void in Texas for sales based financing entered into on or after 9/1/2025, and void or unenforceable in Virginia, California, and Florida.
How long does it take for an MCA lawsuit to lead to a default judgment?
Five to 9 weeks after being served, driven by statutory answer and notice periods. Most merchants outside NY are on this track, often sued in Rockland County, where according to the Rockland County Business Journal “many result in default judgments; few are challenged.”
Statutes governing each step of the lawsuit process
| Court | Time to answer | Required wait before default |
|---|
| New York state | 20 days if handed the papers, otherwise 30 days after service is complete (CPLR 320(a)) | An additional mailing at least 20 days before entry (CPLR 3215(g)) |
| Pennsylvania | 20 days (Pa. R.C.P. 1026) | 10 day non-waivable notice of intent (Pa. R.C.P. 237.1) |
| Federal | 21 days (60 if service is waived) (FRCP 12) | Entry of default, then default judgment (FRCP 55) |
A New York guarantor served by “nail and mail” may have up to 60 days. Before judgment, the only way for a lawsuit to freeze funds is an ex parte order of attachment under CPLR 6201.
What can the MCA funder do once it has a judgment?
For years, the funder can restrain and levy bank accounts. In New York, a restraining notice is effective for one year and can restrain twice the judgment, a levy is void after 90 days under CPLR 5232, judgments accrue interest at 9% per year, and they are presumed satisfied after 20 years. For its effect on your business, see what happens to my business if I stop making payments.
Frequently Asked Questions about MCA Default Judgments
Can an MCA funder freeze my bank account before suing me?
Only if they confess judgment where allowed or get an Order of Attachment under New York’s CPLR 6201, which the funder must move to confirm within 5 days. A UCC-1 lien does not allow them to freeze a deposit account, and a New York restraining notice requires a judgment first.
Will an MCA judgment show up on my personal credit report?
No. Civil judgments have not been reported to the 3 major consumer credit bureaus since July 1, 2017, according to the Consumer Financial Protection Bureau, so claims of 7 years on your personal credit are out of date. Business credit bureaus are separate.
Did New York state ban confessions of judgment?
No. A 2019 New York law limited filing to the county where the debtor had a place of business. Bill S2305, banning confessions of judgment under $5 million, passed the Senate on May 13, 2026, but is still sitting in the Assembly Judiciary committee.
How long do I have to reopen a default judgment?
In Pennsylvania, a petition within 10 days of entry alleging a meritorious defense requires the Court to open it. In New York, you generally have 1 year from service of the Notice of Entry of Judgment to move to vacate under CPLR 5015(a)(1).