An MCA Company Froze My Bank Account — What Now?

A creditor — including a merchant cash advance (MCA) company — generally cannot use a court collection device such as a bank levy, writ of garnishment, or restraining notice to freeze the money already in your business account without first obtaining a judgment; those devices are post-judgment remedies (in New York, for example, a restraining notice under CPLR 5222 issues only after a judgment is entered). But two routes let an MCA funder reach your money with little or no court process, so a freeze can still feel sudden: a confession of judgment (a clause some merchants signed) lets the funder obtain a judgment by filing an affidavit with the court clerk — no lawsuit or hearing — and the federal ban on those clauses covers only consumer credit, not commercial MCAs; and because MCAs are structured as a purchase of your future receivables, after a default a funder can use UCC Article 9 self-help to tell your customers or card processor to pay it directly, diverting income before it reaches your account, with no judgment at all.

The legal tools used to freeze a bank account after a judgment vary by state but commonly include a bank levy / writ of execution (for example, California), a writ of garnishment (for example, Florida and Texas), or a restraining notice served on the bank (for example, New York under CPLR § 5222). Service of one of these on your bank is typically what causes the account to be frozen. One federal exception: when a bank receives a garnishment order, it must first review the account and may not freeze the protected amount of federal benefit deposits — such as Social Security, SSI, or VA payments — so an account holding only those funds may not be frozen at all.

Business accounts held by a separate legal entity — an LLC or corporation — generally do not enjoy the consumer exemptions that protect personal accounts. Federal rules require banks to automatically protect certain federal benefit deposits (like Social Security, SSI, or VA benefits) from garnishment, but those automatic protections are built into accounts owned by an individual, not accounts titled to a corporation or LLC, so an entity's operating account can typically be frozen up to the amount of the judgment plus costs and interest. One important exception: a sole proprietor's 'business' account is legally the owner's own personal account, so it keeps the same automatic federal-benefit protection (when such benefits are deposited) that a personal account would. Most other consumer exemptions are not automatic — they must be claimed — and the exact amount frozen is governed by your state's garnishment law.

Recurring ACH withdrawals — the daily or weekly debits an MCA company is authorized to take — are legally distinct from a post-judgment account freeze. Revoking that authorization or closing the account can stop the scheduled debits, but many MCA agreements treat revoking authorization or closing the account as an event of default, which is itself a common trigger for the lawsuit or confession of judgment that follows. It does not extinguish the underlying debt, and a company that already has a judgment may move to levy the account.