If you have received legal documents, do not ignore them. Court deadlines may be short. This page provides general educational information, not legal advice. Businesses facing litigation should consider obtaining advice from qualified legal counsel.
If You Receive Legal Documents
Receiving legal documents from an MCA company—a summons, complaint, Confession of Judgment, or other court filing—is a serious matter. The following is an educational checklist of steps that may be appropriate.
Educational Checklist
Do not ignore the documents
Ignoring a lawsuit may result in a default judgment being entered against you. This is often the worst possible outcome. Every day may matter.
Identify the plaintiff
Determine which MCA company or creditor has filed the legal action. This may be different from the original funder if the debt was sold or assigned.
Identify the court
Determine which court the action was filed in—state or federal, and which jurisdiction. This affects the rules and deadlines that apply.
Identify response deadlines
Legal documents typically include a deadline to respond. Missing this deadline may result in a default judgment. Note the deadline immediately.
Locate the original agreement
Find the original MCA agreement, including any personal guarantees, Confession of Judgment clauses, and all amendments or modifications.
Preserve communications
Preserve all communications with the creditor—including emails, letters, text messages, and records of phone calls.
Gather payment history
Collect bank statements and records showing all payments made to the creditor, including dates and amounts.
Gather modification/settlement records
If any modifications, payment plans, or settlement discussions occurred, gather all related documentation.
Obtain appropriate legal counsel
Consider obtaining advice from an attorney qualified in the relevant area of law and jurisdiction. Court deadlines and legal rights depend on the specific circumstances.
Understanding Confession of Judgment
A Confession of Judgment (COJ) is a provision that may be included in some MCA agreements. If a business signs an agreement containing a COJ clause, the business may be agreeing in advance to allow the creditor to obtain a court judgment without going through a normal trial or hearing.
Whether a COJ is enforceable, and under what circumstances, depends on the specific contractual language and applicable state law. Several states have restricted or prohibited the use of COJs. The enforceability of any particular COJ depends on the agreement, the jurisdiction, and the facts of the case.
If an MCA agreement includes a COJ, the creditor may be able to file a judgment without prior notice or a hearing. Businesses should review agreements carefully before signing and consider obtaining advice from qualified legal counsel. MyMCAOptions is not a law firm and does not provide legal advice.
Common Legal Actions by MCA Companies
Civil Lawsuit
A formal complaint filed in court. The defendant typically has a limited time to respond before a default judgment may be entered.
Confession of Judgment
If a COJ was signed as part of the MCA agreement, the creditor may be able to obtain a judgment without a trial. Several states have restricted the use of COJs.
Bank Levy / Garnishment
After a judgment is obtained, the creditor may seek to freeze or garnish business bank accounts.
UCC Enforcement
The creditor may pursue rights under their UCC-1 filing to claim business assets or receivables.
Important Tradeoffs & Considerations
- MyMCAOptions is not a law firm and does not provide legal representation or legal advice.
- This page provides general educational information only. It is not a substitute for advice from qualified legal counsel.
- Court deadlines may be very short. Delaying in obtaining legal counsel may result in a default judgment or other adverse outcomes.
- Potential defenses to an MCA lawsuit depend on the specific agreement, applicable state law, and the facts of the case. Only an attorney can evaluate potential defenses.
- Moving bank funds or transferring assets without legal advice may create additional legal issues.
Contracts and applicable law vary. Businesses facing litigation, court deadlines, or other legal issues should consider obtaining advice from qualified legal counsel. MyMCAOptions is not a law firm and does not provide legal advice.
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