Attorney to Vacate a Merchant Cash Advance Judgment in New York

A merchant cash advance judgment usually announces itself the same way: your bank calls, or a payment bounces, and you learn that your operating account has been frozen for a judgment you never knew existed. By the time most business owners find our firm, the funder already has a judgment, the restraining notice is already at the bank, and payroll is days away.

This page is about what happens after the judgment. If the funder has sued you but no judgment has been entered yet, the better starting point is our page on merchant cash advance defense in New York, which covers opposing a CPLR 3213 motion and asserting criminal usury before judgment. Post-judgment, the tools are different, the deadlines are different, and the order in which you use them matters a great deal.

There is real leverage here. New York MCA judgments are frequently vacatable, because the funders' own paperwork is often defective, because the underlying agreement may be void as criminally usurious, and because the balances stated in the affidavits are routinely overstated. What you cannot afford is to wait, since two of the most useful grounds carry hard time limits.

First, Identify Which Kind of Judgment You Have

Everything that follows depends on this. Pull the judgment and the county clerk's file, or have counsel do it, before you decide anything. New York MCA judgments come in three forms, and they are attacked in three different ways.

1. A judgment by confession under CPLR 3218. No lawsuit was ever filed. The funder took the affidavit of confession of judgment you signed at closing, filed it with a county clerk, and had judgment entered. There is no index number from a litigated case, and you were never served with a summons.
2. A default judgment. The funder filed suit, usually a motion for summary judgment in lieu of complaint under CPLR 3213, you did not appear or did not oppose, and the court granted the motion on default.
3. A judgment on the merits. The motion was opposed and granted anyway. This is the hardest of the three, and the realistic paths are an appeal (with a 30 day notice of appeal deadline running from service of the judgment with notice of entry) or a motion under CPLR 5015(a)(2) or (a)(3).

The first two make up the overwhelming majority of MCA judgments in New York, and both are genuinely attackable.

Vacating a Confession of Judgment

For years the affidavit of confession was the industry's core enforcement tool: sign at closing, and the funder can enter judgment against you without filing a lawsuit, without serving you, and without ever proving a default. In 2019 New York amended CPLR 3218(a) to bar the filing of confessions of judgment against debtors who are not New York residents, which ended the practice for out of state merchants. If your business or the guarantor is a New York resident, however, a confession can still be filed against you today.

The Procedural Trap: Motion Versus Plenary Action

This is where business owners lose cases they should win. Under long standing New York law, a debtor generally cannot vacate a judgment by confession by simple motion in the clerk's file. The remedy is a separate plenary action to vacate the judgment, because there is no underlying lawsuit to move in. Courts have carved out room for motion practice where the judgment is void on its face or the court lacked jurisdiction, and practice varies, but a debtor who files an ordinary motion and gets it denied on this ground has burned weeks while the restraint stays in place. The right move is usually to commence the plenary action and simultaneously seek a temporary restraining order by order to show cause, so the freeze is addressed while the merits are briefed.

Grounds That Actually Work

• The affidavit does not comply with CPLR 3218. The statute requires the affidavit to state the sum confessed, authorize entry of judgment, state the county where the defendant resided when it was executed, and state concisely the facts out of which the debt arose along with a statement that the sum confessed is justly due. Conclusory recitals that simply reference an agreement and a number have been held insufficient. In MCA affidavits, the facts section is often boilerplate drafted before any default existed, which is exactly the defect the requirement was written to catch.
• The three year limit in CPLR 3218(b). A judgment by confession may be entered only within three years after the affidavit is executed. Funders sitting on old affidavits sometimes miss this.
• Wrong county. The judgment must be filed in the county the affidavit designates, consistent with the statute. Filings of convenience in a county with no connection to the debtor are challengeable.
• Non-resident debtor. A confession filed after the 2019 amendment against a debtor who is not a New York resident should not have been accepted at all.
• No default, or an inflated balance. The funder swore the sum was justly due. If your ACH history shows it had already collected most or all of the purchased amount, or that the "default" was a bounced debit the funder itself caused by over debiting, the sworn statement is false and the judgment rests on it.
• The underlying agreement is void. If the advance is a disguised loan exceeding 25 percent per year, it is criminally usurious under Penal Law § 190.40 and void ab initio under Adar Bays, LLC v. GeneSYS ID, Inc., 37 N.Y.3d 320 (2021). A void agreement cannot support a confession of judgment. Corporations keep this defense: General Obligations Law § 5-521(3) preserves criminal usury as a corporate defense even though § 5-521(1) bars the civil usury defense.

Vacating a Default Judgment

If the funder actually sued you, the entry points are CPLR 5015 and CPLR 317, and they are not interchangeable.

• CPLR 5015(a)(1), excusable default. You must show both a reasonable excuse for the default and a meritorious defense. The motion must be made within one year after service on you of a copy of the judgment with written notice of entry. Note that the clock runs from that service, not from the date you found out about the frozen account, so date the notice of entry precisely.
• CPLR 317, for defendants not personally served. This is the provision most MCA defendants should be looking at and most do not know about. An LLC or corporation served through the Secretary of State under Limited Liability Company Law § 303 or Business Corporation Law § 306, at an address that is years out of date, was not personally served. Under CPLR 317 you may be allowed to defend on showing that you did not personally receive notice of the summons in time to defend and that you have a meritorious defense, and the window runs up to one year after you learn of the judgment, and in no event more than five years after entry. Crucially, CPLR 317 does not require the "reasonable excuse" showing that trips up 5015(a)(1) motions.
• CPLR 5015(a)(3), fraud, misrepresentation, or other misconduct of an adverse party. There is no fixed statutory deadline on this ground, which makes it the workhorse for older judgments. In MCA cases it is the natural vehicle for inflated default balances, fabricated defaults, sworn affidavits that omit payments already collected, and misrepresentations about service.
• CPLR 5015(a)(4), lack of jurisdiction. Defective service voids the judgment outright, and there is no time limit. Compare the affidavit of service against where your business actually was on that date.

One warning that costs businesses dearly: filing a motion to vacate does not stay enforcement. The restraint stays on your account, and the marshal can keep working, unless you obtain a stay. That is why these applications are brought by order to show cause with a request for interim relief rather than by ordinary notice of motion.

Getting the Account Unfrozen While the Motion Is Pending

A restraining notice under CPLR 5222 obligates your bank to hold up to twice the amount of the judgment and to stop transfers. For a business carrying a $145,000 judgment, that can mean $290,000 immobilized against an account that needs to cover payroll on Friday.

Understand one hard limitation up front. The Exempt Income Protection Act (CPLR 5222-a), with its automatic exempt minimums and exemption claim forms, protects the accounts of natural persons. It does not protect a business operating account. If the judgment is against your LLC or corporation, no EIPA form is coming, and the money simply stays frozen until you get a court order. If the judgment also runs against you personally as guarantor and your personal account was restrained, EIPA does apply there and exempt funds such as Social Security, unemployment, and a portion of wages can be released through the statutory process. Our page on unfreezing a frozen bank account in New York covers the individual side in more detail.

For the business account, the tools are:

• An order to show cause with a TRO vacating or limiting the restraint pending decision on the motion or plenary action. This is the primary vehicle, and it is where the payroll emergency gets addressed.
• CPLR 5240, which gives the court broad discretion to deny, limit, condition, regulate, extend, or modify the use of any enforcement procedure. It requires no formal vacatur ground, only a showing that the enforcement is unreasonable or oppressive. Freezing double a judgment when the funder has already collected most of what it advanced is a strong 5240 record.
• Challenging the restraint itself, for example where the notice was served on an account not belonging to the judgment debtor, or where the funder is holding well beyond the statutory limit across multiple garnishees.
• A negotiated release, often a partial payment or an escrow in exchange for lifting the freeze, which is sometimes faster than motion practice and is worth pricing against the cost of the emergency application.

Worked Example

A Queens contracting LLC takes a $100,000 advance with a $145,000 purchased amount and $1,450 daily debits. Revenue drops, four ACH debits bounce, and the funder declares default after collecting $118,000. It files the confession of judgment signed at closing in New York County for the full $145,000 balance plus fees, and serves restraining notices on two banks, freezing roughly $290,000.

The ACH history shows $118,000 already collected, so the sworn statement that $145,000 was justly due was false when made. The reconciliation clause was requested twice by email and never honored. The effective rate, with the advance repaid over about four months, is far above 25 percent annualized. The response is a plenary action to vacate the judgment, brought together with an order to show cause seeking a TRO lifting the restraints, supported by a debit by debit accounting, the unanswered reconciliation emails, and criminal usury under Penal Law § 190.40 as the meritorious defense. Courts in New York County and Kings County, where most MCA judgments are entered, hear these emergency applications quickly, often within days.

What the Funder Is Doing While You Decide

A judgment is not a static thing. In the weeks after entry, an MCA funder will typically:

• Serve restraining notices on every bank it can identify, and information subpoenas with restraining notices under CPLR 5224 to find more;
• Deliver an execution to the sheriff or a city marshal under CPLR 5232 to levy on the frozen funds;
• Send notices to your customers under UCC § 9-406 instructing them to pay the funder directly, which is often more damaging to the business than the freeze itself, and which is addressed on our page about UCC disputes in New York City;
• Move against the personal guarantor, reaching personal accounts and, where a judgment is docketed against an individual, real property;
• Domesticate the New York judgment in other states where you hold assets.

Each of those steps is easier to stop before it happens than to unwind afterward, which is the practical argument for moving in days rather than weeks.

Before You Sign a Settlement or a Reverse Consolidation

Once a judgment is entered you will get calls offering to resolve it, and some of those offers are worth taking. Read them carefully first. MCA post-judgment settlements routinely include a waiver of the usury defense, a new confession of judgment for the settlement amount, a broadened personal guaranty, and a release of the funder for the very conduct that would have vacated the judgment. A "reverse consolidation" that pays off several advances with a new one often layers a fresh set of daily debits on top of the old exposure. Price the settlement against what the judgment is actually worth to the funder after your defenses are on the record, not against the face amount of the judgment.

What to Do This Week

1. Get the county clerk's file. The judgment, the affidavit of confession or the motion papers, the affidavit of service, and the date of the notice of entry. Those documents determine which grounds are available and which clocks are already running.
2. Pull every bank statement covering the advance and build a debit by debit accounting of what the funder actually collected. In our experience this single document changes more MCA cases than any legal argument, because the sworn balance is so often wrong.
3. Collect the correspondence, especially any reconciliation request you made and how the funder answered, plus texts and emails with the broker about cost and term.
4. Confirm your residency and service facts. Whether the debtor was a New York resident, and what address the Secretary of State had on file, decide whether the confession was properly filed and whether CPLR 317 is open to you.
5. Do not move money between accounts after learning of a restraint. Transfers made in the face of a restraining notice create separate exposure and undermine the equitable relief you are about to ask for.
6. Calendar the one year dates from service of the judgment with notice of entry, and from when you learned of the judgment. Missing them does not end the case, since 5015(a)(3) and (a)(4) remain, but it narrows the argument considerably.

Related Matters We Handle

MCA judgments rarely arrive alone. We also handle commercial loan defaults, claims by lenders such as Bankers Healthcare Group, commercial debt collection matters on both sides, business fraud claims where a funder or broker misrepresented the deal, and creditor rights work for businesses enforcing their own judgments.

You can contact the Law Offices of Albert Goodwin by phone at 212-233-1233 or by email at [email protected].