Sued by a merchant cash advance funder in New York, or your account is frozen: what happens next

By Solomon Wiesen, editor. Updated October 2026. Editorial standards | How this site is funded

If a process server handed you a summons from a merchant cash advance funder in New York, you have 20 days to respond. If it reached you any other way, you have 30 days from the date service is legally complete. Miss that date and the funder can take a default judgment, and its lawyer can then freeze your bank account by serving a notice on the bank, with no judge signing anything.

This is general information about New York procedure and not legal advice. The dates turn on your own papers, so have a New York lawyer read them this week.

Three ways a funder collects, in the usual order

The first involves no court. Cash advance agreements are written as a sale of your future receivables, and the funder records its interest with a UCC filing. Under UCC 9-607, a secured party may, “if so agreed, and in any event after default,” notify the people who owe you money to pay it instead. Under UCC 9-406, once your card processor or a customer receives a signed notice identifying what was assigned, it can discharge its obligation only by paying the funder. The processor may ask for proof of the assignment and keep paying you if none arrives.

The second is a lawsuit, generally in New York Supreme Court in the county your contract names, because CPLR 501 enforces a written agreement fixing the place of trial.

The third is a judgment by confession, which skips the lawsuit and has its own page.

The summons and your deadline

The clock depends on how the papers were delivered. CPLR 320(a) and CPLR 3012 set the periods, and CPLR 308 says when service is complete.

I’d worry most about the third row. The Secretary of State forwards the papers to the address in its records, so if that address is an old storefront, the 30 days can pass before you see anything.

You appear by serving an answer or a notice of appearance, and the business cannot do that without a lawyer. Under CPLR 321(a) a corporation “shall appear by attorney,” and the Appellate Division applied the same rule to LLCs in Michael Reilly Design, Inc. v Houraney (2d Dept 2007). In Colonial Funding Network, Inc. v East Coast Brothers Auto Body & Repair, Inc. (Civil Court, New York County, February 13, 2025, Index No. CV-002290-17/NY), the court vacated a cash advance default judgment for two guarantors who represented themselves and refused their corporation the same relief because it had no counsel.

If nobody appears, CPLR 3215 lets the funder apply for a default judgment, and where the claim is for a sum certain the clerk can enter it without a hearing.

To see the file, search your business name or the index number on NYSCEF, the courts’ e-filing system; you do not have to log in to search. The e-Courts page also links WebCivil Supreme and eTrack, which sends notices of case activity.

Before judgment: orders of attachment

A funder can ask a judge to tie up your assets before it wins, through an order of attachment under CPLR Article 62. CPLR 6201 lists five grounds, and three could apply to a business debt: the defendant lives outside New York or is a foreign corporation not qualified here; a New York defendant cannot be personally served despite diligent efforts; or the defendant has moved or hidden property with intent to defraud creditors. Falling behind on payments is not on the list. The funder must show that it will probably succeed and post an undertaking of at least $500 (CPLR 6212). A judge may grant the order without notice to you (CPLR 6211).

After a judgment: restraint, levy, subpoena

Under CPLR 5222 the funder’s attorney, acting as an officer of the court, can issue a restraining notice and serve it on your bank. The bank must then hold what it has of yours and what comes in later, up to twice the judgment amount, for one year or until the judgment is satisfied or vacated.

A restraint only holds the money in place. To take it, the funder has the sheriff levy on the account under CPLR 5232 or asks a judge for a turnover order under CPLR 5225. An information subpoena under CPLR 5224 can go by certified mail to you or to your bank, with questions to be answered under oath within seven days.

Interest runs at 9 percent a year under CPLR 5004, which is $5,400 a year on a $60,000 judgment. The section’s 2 percent rate is limited to consumer debt owed by an individual.

The Exempt Income Protection Act procedure in CPLR 5222-a is limited to “a natural person’s account.” For such an account, the restraining notice must reach the bank with an exemption notice and two exemption claim forms or it is void. Section 5222(i) also sets a floor of 240 times the minimum hourly wage, which at New York City’s $17.00 minimum wage is $4,080 as of October 2026, unless a court trims it. A business checking account does not get the 5222-a procedure. If you signed a personal guarantee and the judgment names you, your personal account can be restrained, with the forms and the floor.

Getting a default judgment vacated

CPLR 5015(a) lists the grounds. Excusable default requires a motion within one year after you are served with a copy of the judgment and written notice of its entry. Fraud or other misconduct by the funder, and lack of jurisdiction, which covers defective service, carry no deadline in the statute’s text. CPLR 317 is a separate route for a defendant who was served other than by personal delivery and “did not personally receive notice of the summons in time to defend.” It requires a meritorious defense and a motion within one year after you learn of the judgment, and no more than five years after its entry.

In Colonial Funding Network, Inc. v Swift Health Care, Inc. (Supreme Court, New York County, February 15, 2024, Index No. 654647/2016), a funder restrained a bank account in January 2024 on a default judgment from February 2018. The court found the company had never been validly served, vacated the judgment against it under 5015(a)(4) and lifted the restraint.

Defenses that have worked

Three show up in reported decisions. On usury, the Appellate Division in LG Funding, LLC v United Senior Properties of Olathe, LLC (2d Dept, March 11, 2020) refused to dismiss a defense that an advance was a criminally usurious loan. On reconciliation, the First Department in Davis v Richmond Capital Group, LLC (May 13, 2021) let merchants’ claims proceed where the funders allegedly refused the reconciliation their contracts described. On service, see Swift Health Care above. The page on New York usury law and merchant cash advances has the detail.

Settling

A case can be settled at any stage, including after judgment. Get the terms signed before you pay, and check for four things: a release of the business and every guarantor; a stipulation of discontinuance that says “with prejudice,” because under CPLR 3217 a discontinuance is otherwise without prejudice; a satisfaction-piece under CPLR 5020 if a judgment was entered; and termination of the funder’s UCC filing.

The IRS says a debt canceled for less than the amount owed is generally taxable income unless an exclusion such as insolvency or bankruptcy applies. Ask your accountant before you sign.

Where to get help in New York City

Each of these was operating as of October 2026. The free programs are transactional: NYC Small Business Services says its pro bono lawyers cannot assist cases already in litigation, and Volunteers of Legal Service says it does not handle disputes with third parties. Plan on paying a defense lawyer.

• The New York City Bar Legal Referral Service (212-626-7373) refers you to a private lawyer; a first consultation of up to 30 minutes costs $35 or nothing.
• The City Bar Justice Center’s Neighborhood Entrepreneur Law Project (212-382-6633) places owners of limited means with pro bono lawyers for contracts and leases.
• The VOLS Microenterprise Project (347-521-5729) serves city owners with income under 500 percent of the federal poverty guidelines and personal assets under $100,000.
• Start Small Think Big pairs owners with volunteer attorneys and financial advisors at no cost.
• NYC Small Business Services arranges free legal consultations and runs a Financing Assistance service for loan applications.
• The Attorney General’s Yellowstone settlement page tells owners with problems at any cash advance company to file a complaint through its online form.
• The Department of Financial Services complaint portal takes complaints about financial products, and DFS wrote the regulation behind New York’s cost disclosure rule.

The first 48 hours

1. Find the index number on the summons and pull the docket on NYSCEF.
2. Work out how you were served and calendar the deadline, using the earlier date if two are possible.
3. Do not let that date pass. A late answer needs a judge’s permission under CPLR 3012(d), and a default has to be undone by motion.
4. Gather the agreement with every addendum, plus each bank statement showing the funder’s debits.
5. Call a lawyer today; the business cannot answer without one.
6. Do not sign a new advance to pay this one; the math is on the stacking page. If you settle and need cheaper money afterward, the financing request form is one place to start.

Sources

• Statutes: the State Senate’s legislation site, sections linked above.
• Decisions: New York Official Reports at nycourts.gov.
• Agencies: Unified Court System, Attorney General, Department of Labor, IRS.