MCA Default Judgments: What They Mean and What May Follow
A judgment is a court order that may result from a lawsuit. Understanding what a judgment is, how it differs from a lawsuit and a default notice, what remedies it may enable, and what confession of judgment means can help business owners evaluate their situation and determine what steps may be appropriate.
What a Judgment Is
A judgment is a court order that may result from a lawsuit. When a creditor files a lawsuit and prevails — either through a court decision or because the defendant fails to respond — the court may enter a judgment in the creditor’s favor. A judgment establishes the amount owed and may enable the creditor to pursue additional remedies to collect on that amount.
A judgment is distinct from a default notice and from a lawsuit. A default notice is a creditor communication. A lawsuit is a court filing. A judgment is a court order that may result from a lawsuit. Each stage is a distinct step that may or may not follow the previous one.
How a Judgment Differs From a Lawsuit
A lawsuit is the process of filing a legal action in court. A judgment is the result of that process. Not every lawsuit results in a judgment — the parties may settle, the case may be dismissed, or the defendant may prevail.
A judgment is also distinct from a default notice. A default notice is a communication from the creditor. A judgment is an order from a court. A default notice does not enable post-judgment remedies. A judgment may.
A judgment is a court order, not a creditor communication. It may enable remedies such as levies or garnishments under applicable law. A default does not automatically create a judgment — the creditor typically needs to file and prevail in a lawsuit first.
What Remedies a Judgment May Enable
If a judgment has been entered, the creditor may be able to pursue post-judgment remedies under applicable law. The specific remedies available depend on the jurisdiction and applicable law, but may include:
- ›A bank account levy, which may allow the creditor to collect funds from the business bank account through a legal process.
- ›A garnishment of receivables or other payments, which may redirect money owed to the business to the creditor.
- ›A lien on real property or other business assets.
- ›In some cases, garnishment of wages or other personal income, particularly if a personal guaranty is involved.
- ›Discovery in aid of execution, which may require the business or guarantor to disclose asset and financial information.
A judgment does not automatically mean immediate account seizure. The creditor may need to take further steps to enforce the judgment, and the available remedies depend on the jurisdiction and applicable law. If a judgment has been entered, consult qualified legal counsel.
Confession of Judgment
Some MCA agreements include a confession of judgment provision. Where included and enforceable, a confession of judgment may allow a creditor to potentially enter judgment without the usual lawsuit process, depending on applicable law and jurisdiction. This means that the creditor may be able to obtain a judgment more quickly than through a traditional lawsuit.
Confessions of judgment are treated differently across jurisdictions. In some states, they are restricted or may be unenforceable in certain circumstances. Whether a confession of judgment provision is enforceable depends on the specific language, the jurisdiction, and applicable law. If your agreement includes a confession of judgment provision and you are concerned about its potential effect, consulting qualified legal counsel may be appropriate.
What a Judgment Does Not Automatically Do
Understanding what a judgment does not automatically do is as important as understanding what it may enable:
- ›A judgment does not automatically freeze a bank account. The creditor may need to obtain a levy or restraining order through a separate process.
- ›A judgment does not automatically give the creditor ownership of business assets. The creditor may need to pursue execution or foreclosure.
- ›A judgment does not automatically extend to personal assets unless a personal guaranty is involved and has been enforced through proper process.
- ›A judgment does not resolve the underlying obligation — it establishes the amount owed and may enable collection remedies.
What to Do If a Judgment Has Been Entered
If a judgment has been entered against you or your business, you should consult qualified legal counsel promptly. An attorney licensed in your jurisdiction can advise you on what remedies may be available to the creditor, what steps may be taken to enforce the judgment, and what options you may have. There may be deadlines for certain actions, such as filing a motion to vacate or appealing the judgment, that should not be ignored.
MCA Default and MYMCAOPTIONS LLC are not law firms and do not provide legal advice. This page provides educational information only.
If a judgment has been entered, consult qualified legal counsel promptly. There may be deadlines for certain actions that should not be ignored. MCA Default and MYMCAOPTIONS LLC are not law firms and do not provide legal advice.
Can a Judgment Be Settled or Resolved?
A judgment may be settled or resolved through negotiation with the creditor, but this is not guaranteed. The creditor may be willing to accept a negotiated resolution, or may pursue enforcement of the judgment through available remedies. Any negotiation involving a judgment should be conducted with qualified legal counsel who can advise on the legal implications and protect your interests.
Settlement of a judgment does not automatically vacate or remove the judgment from the court record. The process for vacating or satisfying a judgment depends on the jurisdiction and applicable law.
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