7 Stages of an MCA Lawsuit in New York (And How Long Each Takes)

If you’ve defaulted on a merchant cash advance, and you’re in New York, the lawsuit is coming. It’s not a question of if. It’s a question of when, and how fast it moves once it starts.

Short answer: An MCA lawsuit in New York moves through 7 stages — demand letter, filing, service, answer window, motion for summary judgment in lieu of complaint (CPLR 3213), judgment, and enforcement. From default to a frozen bank account, the whole thing can happen in 60-90 days. In aggressive cases, under 45.

Most business owners assume they have time. They don’t. New York is the friendliest jurisdiction in the country for MCA funders, and the funders know it. That’s why almost every MCA agreement names New York as the forum, even if you’ve never set foot in the state.

Here’s exactly what happens, in the order it usually happens.

Stage 1: The Demand Letter (Days 1-14 after default)

The first thing you’ll get is a letter from the funder’s attorney. Sometimes by email. Sometimes by certified mail. Sometimes both.

This letter does three things. It tells you the full balance has been accelerated. It demands payment in full, usually within 5-10 days. And it threatens legal action if you don’t comply.

A lot of business owners ignore this letter. That’s a mistake. The demand letter is your last cheap window to settle. Once the lawsuit gets filed, the funder is paying their attorney, the attorney is billing hours, and those fees get added to your balance. Settling pre-litigation is almost always 30-50% cheaper, than settling after a complaint is filed.

The clock here is short. Most funders’ attorneys give you 5-10 business days. Some give you 24 hours.

Stage 2: The Lawsuit Gets Filed (Days 14-45)

If you don’t pay, or settle, the complaint gets filed in New York Supreme Court. Usually in Westchester, Erie, Orange, or Kings County — these are the venues MCA funders prefer, because the judges see these cases all day, and the court calendars move fast.

Two things to know about the filing.

First, the complaint will name you personally, not just your business. Every MCA agreement includes a personal guaranty (or a “performance guaranty” that functions as one). The funder is suing you, your spouse if they signed, and any other guarantor on the deal.

Second, the complaint is almost always filed alongside a motion for summary judgment in lieu of complaint under CPLR 3213. This is the procedural weapon that makes New York so dangerous. More on that in Stage 5.

Stage 3: Service of Process (Days 21-90)

Now they have to serve you. In New York, service is governed by CPLR 308. The funder can serve you personally, leave the papers with someone of suitable age at your home or business and mail a copy, or — if those fail — post the papers and mail a copy (“nail and mail”).

Timing here can vary, from a week to several months. If you’re easy to find, you’ll be served within a few days. If you’re avoiding service, it can drag out 60-90 days.

But avoiding service doesn’t help you. It just delays the inevitable, and it pisses off the judge, who will eventually allow alternative service. Many business owners think if they don’t get served, the case can’t move forward. That’s only partially true. If the funder can show the court they made diligent efforts, the judge will allow service by publication, or another alternative method. You can’t hide forever.

Stage 4: The Answer Window (20-30 days from service)

Once you’re served, the clock starts. You have 20 days to answer if you were served personally in New York, 30 days if served any other method or outside the state.

Miss this window, and the funder files for default judgment. The court doesn’t review the merits. It just enters judgment for whatever the funder asked for. Default judgments are very hard to vacate — you have to show a reasonable excuse and a meritorious defense, and the standard is not friendly to defendants who simply ignored the lawsuit.

This is the single most common way MCA cases end. Not on the merits. By default. Because the business owner panicked, ignored the papers, or assumed they couldn’t fight it.

If you’re going to defend, this is where you need an attorney. Yesterday.

Stage 5: The CPLR 3213 Motion (30-60 days)

This is the stage that matters most, and almost nobody outside the MCA defense bar understands it.

Under CPLR 3213, a plaintiff suing on an “instrument for the payment of money only” can skip the normal litigation process and move directly for summary judgment. No discovery. No trial. No jury. The motion is decided on the papers, usually within 30-60 days of being fully briefed.

MCA funders argue their agreements qualify under 3213. The defense argues they don’t — because an MCA isn’t a loan, it’s a purchase of future receivables, and the obligation to pay is contingent on revenue, not absolute. This is the core legal fight in almost every MCA case in New York.

Some judges side with the funder. Some side with the defense. The Appellate Division has gone both ways. If your judge denies the 3213 motion, the case converts to normal litigation — discovery, depositions, the whole process — which takes 12-24 months, and gives you real leverage to settle. If the judge grants it, you have a judgment against you in 60-90 days from when the lawsuit was filed.

Stage 6: Judgment Is Entered (Days 60-120)

Whether by default or by 3213 motion, judgment gets entered. The funder now has a court order saying you owe them X dollars.

This is when most business owners realize how serious this actually is. A judgment in New York is good for 20 years, and accrues interest at 9% per year. It also shows up on your credit, becomes a public record, and can be domesticated in any other state where you have assets.

The judgment amount usually includes the accelerated balance, default fees, attorney fees (often 33% of the balance), court costs, and pre-judgment interest. A $100,000 MCA balance routinely turns into a $160,000-$180,000 judgment.

Stage 7: Enforcement (Begins immediately, lasts years)

This is where the funder turns the judgment into actual money — and where most business owners experience the real damage.

Enforcement in New York runs on three tools.

Restraining notices (CPLR 5222). The funder’s attorney serves a restraining notice on every bank where you have an account. The bank has to freeze the account up to twice the judgment amount, immediately, no court hearing required. You will find out when your debit card stops working. This includes personal accounts if you personally guaranteed the MCA. It includes joint accounts with your spouse.

Information subpoenas (CPLR 5224). The funder’s attorney sends subpoenas to you, your bank, your customers, your credit card processor, and anyone else they think might know where your money is. You have to respond. Lying or ignoring it is contempt of court.

Marshal or sheriff levy (CPLR 5232). Once the funder identifies an account, or an asset, they direct the marshal (in NYC) or sheriff (elsewhere) to levy. The money in the account gets handed over. Equipment, vehicles, and other tangible property can be seized and sold.

This stage doesn’t end until you settle, pay, or file bankruptcy. Funders will keep enforcing for years. Some will sit on a judgment, do nothing for 18 months, then hit you the day they see a deposit.

What This Means If You’re Reading This Mid-Default

The timeline is short. The procedural weapons stack against you. New York courts move fast on these cases, and the funders have done this thousands of times.

The leverage points are: pre-litigation settlement (Stage 1), defending the 3213 motion (Stage 5), and post-judgment settlement (Stage 7, but at much worse terms than earlier stages). Everything else is the funder running the play.

If you’re behind on an MCA, or you’ve already gotten a demand letter, the worst thing you can do is wait. The second worst thing is hire an attorney who’s never defended an MCA case in New York Supreme Court — most general commercial litigators don’t know the 3213 fight, and will lose it for you.