You log into your bank account and find it restrained. A vendor mentions your business credit is flagged. You search your name in the court records and discover a default judgment was entered against you three months ago by an MCA funder you barely remember signing with. You never got served. You never had a chance to respond.
This happens constantly in the MCA world, and it is one of the few situations where the legal system actually works in the merchant’s favor if you move quickly.
Summons delivered to old address, wrong person, or never delivered at all.
Venue clause unenforceable; no minimum contacts with the forum state.
Reasonable explanation for missed deadline plus a real merits defense (usury, recharacterization).
Funder misrepresented service, the contract, or the underlying transaction.
Claim was already time-barred when the lawsuit was filed — judgment is void on its face.
What a Default Judgment Means and Why MCAs Use Them
A default judgment is a ruling entered against you because you did not appear or respond to a lawsuit. MCA funders historically relied on confessions of judgment (COJs), which let them skip the lawsuit step entirely. After New York’s 2019 reform restricting COJs to in-state merchants, many funders pivoted to filing actual lawsuits in friendly jurisdictions and pursuing default judgments when the merchant fails to answer.
The problem: service of process is frequently defective. The funder serves an old address. Serves a registered agent who never forwards the papers. Serves by publication in a county you have no connection to. Twenty days pass with no answer. They get their judgment, restrain your accounts, and the first you hear about it is when the money is already gone.
Grounds to Vacate the Judgment
An independent attorney from our network can move to vacate the judgment on several grounds. The most common are:
- Improper service. The summons was never properly delivered, or was delivered to the wrong address or person.
- Lack of personal jurisdiction. The court never had authority over you because the contract’s venue clause is unenforceable or you have no connection to the forum.
- Excusable default with a meritorious defense. You can show a reasonable explanation for missing the deadline and a real defense to the underlying claim (usury, recharacterization, payment).
- Fraud or misrepresentation. The funder misrepresented service or the underlying transaction.
Time matters. Most jurisdictions impose a one-year deadline to move under the standard vacatur rule, but jurisdictional and service-based challenges often have no deadline. The longer you wait, the more the funder can argue you knew about the judgment and slept on your rights.
What You Need to Pull Together Before the Call
Before your independent attorney files anything, get the docket. Pull the affidavit of service. Compare the address served to where you actually lived or operated. Find the original MCA agreement. Pull bank records showing what the funder actually deducted versus what they claim is owed.
If the affidavit says the process server handed papers to “John Doe, co-tenant, white male, 5’10”, 40 years old” at an address you moved out of two years ago, that is your engagement. Sworn affidavits from people who were actually at that address rebutting the service description carry enormous weight.
Defending a vacatur motion is expensive, and once the judgment is vacated, the funder is back to square one with a real lawsuit they may not want to litigate. That leverage is what creates settlement room.
The Negotiation Angle Most Merchants Miss
Here is what experienced MCA funders know that you do not: defending a vacatur motion is expensive, and once the judgment is vacated, the funder is back to square one with a real lawsuit they may not want to litigate. That leverage is what creates settlement room.
Our senior advisors regularly negotiate dramatic reductions, often 30 to 50 cents on the dollar, on judgments that are facing credible vacatur motions. The funder weighs a guaranteed reduced payment today against years of litigation, depositions, and a real risk of zero recovery if a court finds the underlying contract was a usurious loan rather than a true purchase of receivables.
What to Do Right Now
If you just found out about a judgment: do not contact the funder directly. Do not pay anything until the lien situation is mapped. Get your bank account statement to confirm what was taken. Then call us.
Within the first 48 hours we can usually tell you whether the judgment is vulnerable, what the realistic settlement range is, and which independent attorney in our network is best positioned to file the vacatur motion in your jurisdiction.
Delancey Street is a business debt-relief company, not a law firm. When a matter requires legal work, we refer you to an independent attorney from our referral network; the attorney–client relationship is between you and that attorney.
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