Enforcements
When a merchant cash advance lender enforces repayment, it can feel like your business is under siege. Frozen bank accounts, unexpected withdrawals, or property liens can throw your operations into chaos. The stress is real, but so are your options.
At Colonna Cohen Law, we don’t just understand the law—we understand what’s at stake for you. Your business, your livelihood, and your peace of mind are worth fighting for. Whether enforcement comes through court orders or sneaky non-judicial tactics, we’ll stand by your side to challenge these actions and protect your future.
Are you ready to push back and regain control? Let us show you what you can do and how our NYC judgment enforcement attorney can assist you.
Understanding Enforcement Actions in Merchant Cash Advance Lawsuits
Merchant cash advance (MCA) agreements often come with hidden risks. When you miss payments, lenders can take drastic enforcement measures. These actions can freeze your accounts, take your earnings, or even seize assets.
When an MCA lender takes enforcement actions, the impact can be devastating. These actions aim to recover unpaid debts but often leave business owners struggling to stay afloat.
What Are Possible Enforcement Actions?
UCC liens vary based on what assets the lender is claiming. Knowing which type of lien is filed against you can help you understand its impact and your next actions. Below are the three main typAs part of their enforcement measures, MCA lenders may:
- Freeze your bank accounts to secure funds owed
- Garnish wages or other earnings
- File property liens to claim ownership of valuable assets
- Withdraw funds directly from your accounts through ACH debits
Some of these actions require a court order (judicial enforcements), while others can be initiated without court involvement (non-judicial enforcements).
Why Do Enforcement Actions Happen?
Enforcement actions typically begin when a borrower is unable to meet repayment schedule obligations under the MCA agreement. However, they may also occur if the lender claims you violated other contract terms, such as failing to provide adequate documentation or attempting to close a business account.
Judicial Enforcements: Court-Ordered Actions
Enforcement actions typically begin when a borrower is unable to meet repayment schedule obligations under the MCA agreement. However, they may also occur if the lender claims you violated other contract terms, such as failing to provide adequate documentation or attempting to close a business account.
Information Subpoenas with Restraining Notice
One common tool is the Information Subpoena with Restraining Notice. These are sent to individuals or entities (known as garnishees) who may hold funds or assets belonging to the judgment-debtor. Garnishees can include banks, business partners, or other parties handling financial accounts.
Upon receiving this subpoena, the garnishee must:
- Hold any funds belonging to the debtor, effectively freezing those assets; and
- Answer the subpoena, providing information about the funds or assets held.
This process allows creditors to locate and secure funds owed. However, improper or overly broad subpoenas can harm third parties or create undue hardship for businesses. If you believe a restraining notice is unjust, you may have legal grounds to challenge it.
Enlisting the Sheriff or Marshal to Enforce a Levy
Creditors can enlist sheriffs or marshals to enforce a levy on the debtor’s assets. This action allows the sheriff or marshal to seize assets, such as bank account funds, to satisfy the debt. In New York, sheriffs and marshals have jurisdiction only over assets located within the state. For example:
- A marshal can seize a debtor’s funds from a bank account if the account is held within New York.
- If the debtor’s assets are located outside New York, the marshal legally has no authority to seize them.
However, cases of misconduct where marshals have overstepped their jurisdiction and attempted to seize out-of-state assets are not unheard of. Such actions are not only unlawful but can also expose the marshal and creditor to legal consequences. If your assets are located outside New York and a marshal attempts to levy them, contact a NYC judgment enforcement attorney as soon as possible.
Debtor’s Exam
Another enforcement tool is known as the “debtor’s exam,” a process similar to a deposition. In this proceeding, the judgment-debtor is required to answer questions under oath about their financial situation, assets, and liabilities.
The purpose of the exam is to help creditors identify:
- Where the debtor’s assets are located.
- How those assets can be accessed to satisfy the judgment.
While the debtor is legally obligated to provide accurate information, this process can feel invasive and intimidating. Debtors often worry about accidentally disclosing information that could lead to further enforcement actions. Having an attorney by your side can help ensure the creditor’s questions remain within appropriate boundaries and that you don’t expose yourself to even more problems.
Non-Judicial Enforcements: Actions Without Court Involvement
MCA lenders often take aggressive steps to recover unpaid debts without court involvement. These non-judicial enforcement actions can bypass judicial oversight and strike directly at a business’s operations and relationships. While legal in many cases, such actions often have devastating consequences for merchants.
UCC-1 Financing Statement and Its Role in Enforcement
When an MCA agreement is funded, lenders typically file a UCC-1 financing statement. This filing secures their interest in the merchant’s receivables or other specified collateral. If the lender declares the merchant in default, they can use the UCC-1 to enforce repayment aggressively.
One of the most damaging tactics involves sending letters directly to the merchant’s customers or clients. These letters typically:’
- Include a copy of the executed MCA agreement and the UCC-1 financing statement;
- Demand that any money owed to the merchant be rerouted directly to the lender; and
- Threaten the customers or clients (garnishees) with lawsuits for damages if they fail to comply.
Impact on Business Relationships and Reputation
This enforcement method can have catastrophic effects on a merchant’s business. Customers and clients become wary of dealing with a merchant whose receivables are being claimed by a lender, which can lead to loss of trust. In addition, the lender’s direct communication with customers paints the business as financially unstable or unreliable. As a result, it’s not uncommon for customers to hesitate to pay invoices or continue contracts, fearing legal entanglement.
The result is often more than financial damage—it erodes the relationships a business relies on to survive. For small businesses, these relationships can be the lifeblood of their operations, and losing them can lead to irreparable, long-term harm.
Interpleader Actions and Court Escrow Accounts
When customers or clients (garnishees) are caught in the middle of these disputes, they may resort to filing an interpleader action in court. This allows them to deposit the disputed funds into a court escrow account, leaving the court to decide who is entitled to the money.
While this tactic protects the garnishee from liability, it has serious consequences for the merchant:
- Escrow delays: The funds are held by the court until the case is resolved, depriving the merchant of crucial cash flow.
- Client alienation: The garnishee often chooses to sever ties with the merchant to avoid future complications.
- Business fallout: The merchant’s reputation suffers considerable damage, making it difficult to retain existing clients or attract new ones.
In many cases, the interpleader action effectively ends the merchant’s relationship with the client, as no business wants to risk repeated legal entanglements.
Defending Against Enforcement Actions in MCA Lawsuits
Enforcement actions from MCA lenders can feel like an attack on your livelihood. These actions often come without warning, freezing accounts, seizing assets, or disrupting business relationships. The stress and confusion can leave you feeling powerless—but the good news is that you may have options to defend yourself.
First and foremost, you need to keep in mind that lenders don’t have unlimited power, even if they hold a judgment. They must follow strict legal rules when enforcing repayment. Many enforcement actions rely on confusing contracts or lender overreach.
If you are facing an enforcement action, start by examining your MCA agreement. Look for terms that might be unclear or unfair. Predatory lenders often use vague language to justify harsh actions. An experienced NYC judgment enforcement attorney can help you spot these issues and build a strong defense.
You need to understand that not all enforcement actions are legitimate. Consider this, for example:
- Did the lender send unauthorized letters to your clients?
- Has the lender tried to seize assets outside their legal jurisdiction?
- Were you given proper notice of legal actions against you?
If the lender crossed the line, you can—and you should—fight back. Courts often side with debtors when lenders act improperly.
Frequently Asked Questions (FAQs) About Enforcements in MCA Cases
Creditors in New York typically have 20 years to enforce a money judgment, according to the New York State Unified Court System. In some cases, the judgment can be renewed, allowing creditors to extend this period even further.
Creditors can use judicial methods like wage garnishment, bank account freezes, property liens, and levies. Non-judicial actions include redirecting customer payments or filing a UCC-1 financing statement to secure assets.
Yes, you can challenge enforcement actions, especially if they are improperly executed or exceed legal limits. A New York enforcement attorney can help you understand your options for challenging the action after reviewing your situation.
Yes, some federal and state laws protect certain assets, like personal property, a portion of wages, or retirement accounts. These exemptions vary, so it’s important to discuss your particular situation with a New York enforcement attorney.
Failure to comply can result in additional legal consequences, including fines, interest on the judgment, or even contempt of court.
Yes, some non-judicial actions, such as redirecting customer payments or ACH debits, don’t require court approval. These actions rely on terms in the MCA agreement but may still be challenged if they are unlawful.
Filing for bankruptcy triggers an automatic stay, which temporarily stops most enforcement actions. Depending on the type of bankruptcy, some debts may be discharged, reducing or eliminating enforcement risks.
Yes, creditors can target your business assets and bank accounts to satisfy a judgment. However, there are often legal defenses or exemptions that can protect some or all of these assets.
Yes, creditors can pursue enforcement in other states but must domesticate the judgment first. This process ensures compliance with the laws of the state where enforcement is sought.
How Colonna Cohen, a Judgment Defense Lawyer, Can Assist In Mitigating Enforcements
At Colonna Cohen Law, we understand how enforcement actions can disrupt your business and your life. We are dedicated to defending businesses against MCA lenders in enforcement actions and lawsuits. Our New York enforcement attorney will:
- Review your case and identify any lender misconduct or illegal practices
- Challenge improper enforcement actions in court
- Negotiate with MCA lenders to reach a fair resolution
At Colonna Cohen Law, we don’t just see your case as another legal matter—we see the person behind the business. Your work, your relationships, and your peace of mind matter to us. We’ll fight tirelessly to protect your assets, reputation, and future. Request a consultation today by calling us at 917-740-2077 or reaching out via our website.
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If your business is struggling with Merchant Cash Advance lawsuits, frozen accounts, UCC liens or collection actions, please contact Colonna Cohen Law to provide relief and protect your livelihood.
