If you signed a personal guarantee on a merchant cash advance, and you’re behind on payments, this is the article you need to read before you do anything else.
Short answer: When you personally guarantee an MCA, and the business defaults, the funder can come after your personal assets to satisfy the balance. That means your house, your bank accounts, your car, your wages, your retirement accounts in some cases, your investment accounts, and any business you own on the side. The personal guarantee strips away the liability shield your LLC or corporation was supposed to give you. Most business owners don’t fully understand what they signed. By the time they do, it’s too late.
If you’re reading this because a process server already came, or you got a notice of entry of judgment, skip to section 7. The rest of this is for people who still have time to make decisions.
What a personal guarantee actually does
When you signed the MCA agreement, somewhere in there, was a personal guarantee. It’s usually a separate paragraph, sometimes a separate document, and it says something like – “the undersigned personally and unconditionally guarantees the obligations of the merchant.” That one sentence is the entire reason your personal assets are now exposed.
Without a personal guarantee, the MCA funder can only chase the business. With one, they can chase you. Personally. As an individual. Your LLC means nothing in this context, your S-corp means nothing, the legal separation between you and the business is gone the moment you signed.
And here’s the part most people miss – the guarantee doesn’t expire when you stop paying. It doesn’t expire if you sell the business. It doesn’t expire if you dissolve the entity. It follows you, until the balance is satisfied or settled.
The 7 personal assets at risk
1. Your primary residence
This is the one that keeps people up at night, and it should. If a funder gets a judgment against you personally, they can record that judgment as a lien against your home. In most states, the lien attaches to the property automatically once recorded.
What that means practically – you can’t sell or refinance the house without dealing with the lien. The funder doesn’t have to foreclose to hurt you. They just have to wait. The moment you try to access the equity, they get paid first.
In some states, there’s a homestead exemption that protects a portion of the equity. Florida and Texas have very strong protections. New York, New Jersey, and most of the northeast – much weaker. If you live in a state with a weak homestead exemption, and you have real equity in the house, you are exposed.
2. Your personal bank accounts
This is the fastest moving threat. Once a funder has a judgment, they can issue a restraining notice, or in New York specifically, they can use a confession of judgment(if you signed one) to freeze your accounts within hours – without warning.
You wake up, go to pay your mortgage, and the account shows zero available balance. Every dollar in it, frozen. Including money that came in from sources that have nothing to do with the business.
The bank doesn’t call you, the bank doesn’t warn you. They get the notice, and they freeze. You find out when a payment bounces.
3. Your wages and personal income
If you draw a salary from the business, or you have a W-2 job on the side, or your spouse pays you for something – all of that is potentially garnishable. Different states have different rules on how much can be taken, federal law caps it at 25% of disposable income, but some states cap it lower.
If you’re a 1099 contractor, the rules are different and in some ways worse – the funder can issue a levy on the entity paying you, and intercept the payment before it ever hits your account.
4. Your vehicles
Cars, trucks, motorcycles, boats – if titled in your personal name, and not subject to a lien that exceeds their value, they can be seized and sold. In practice, funders rarely chase vehicles unless they’re high value(a Porsche, a boat, a Harley collection). It’s not worth the cost of the sheriff’s sale on a 2018 Camry.
But high-value vehicles? Absolutely on the table. And here’s the trap – transferring the title to your spouse or a family member after the default, can be unwound by the court as a fraudulent conveyance.
5. Your investment and brokerage accounts
Your Schwab, Fidelity, Robinhood, E*Trade – all of it is exposed. These accounts are not protected the way retirement accounts are. A funder with a judgment can levy a brokerage account, and the broker is required to comply.
This includes crypto held on a US exchange like Coinbase or Kraken. The exchange will respond to a levy, the same way a bank will. People assume crypto is untouchable. It’s not, if it’s on an exchange in your name.
6. Your retirement accounts (sometimes)
This is one of the more misunderstood areas. ERISA-qualified retirement accounts – 401(k)s, pensions, most employer-sponsored plans – have very strong federal protections. A judgment creditor generally cannot touch them.
IRAs are different. Federal bankruptcy law protects up to a certain amount(currently around $1.5 million, adjusted periodically). But outside of bankruptcy, IRA protection depends on state law, and it varies dramatically. In some states, IRAs are fully protected, in others they are partially protected, in a few they are exposed.
If you have a SEP-IRA or solo 401(k) tied to your business, the analysis gets more complicated, and you should not assume it’s safe.
7. Other businesses, side income, and ownership interests
This is the one nobody warns you about. If you own any percentage of another business – an LLC, an S-corp, a partnership, even a side hustle that brings in a few thousand a month – that ownership interest is an asset. The funder can get a charging order against it, intercept distributions, and in some states, force a sale of the interest.
Same with intellectual property in your personal name. Same with accounts receivable owed to you personally. Same with cash value life insurance policies(in many states). Same with valuable collections – watches, art, jewelry – if they can prove you have them.
What to do if you signed a personal guarantee and you’re behind
Don’t wait. The single biggest mistake people make, is assuming they have more time than they do. The MCA enforcement timeline is fast, and it’s faster when there’s a personal guarantee involved, because the funder knows there’s something worth chasing.
Three things you should do today, if any of this applies to you –
- Pull the original MCA agreement. Find the personal guarantee section, find the confession of judgment if there is one, and understand exactly what you signed.
- Stop moving money around. Transferring assets to a spouse, a family member, or a new entity, after you’re already in default, is a fraudulent conveyance. It can be unwound, and in some cases, it can be criminal.
- Talk to someone who actually does this work. Not a general practice attorney, not your accountant, not a buddy who had an MCA five years ago. The MCA world has changed, the enforcement is more aggressive, and the funders have gotten more sophisticated. You need someone who handles this every day.
