A Default Judgment Is Not a Final Answer
When a court enters a default judgment against a business on an MCA claim, the natural reaction is to treat it as a concluded matter. It is not. Default judgments in MCA cases — particularly those involving confessions of judgment — have been challenged, vacated, and overturned with increasing regularity as courts have grown more skeptical of the underlying agreements that produced them. The clock runs from the moment you learn of the judgment, so every day of inaction costs options.
Step 1: Identify Exactly What Was Entered and How
Before any motion is filed, you need the complete record of what was entered against you. This means obtaining a copy of the judgment itself, the affidavit in support of any confession of judgment, the underlying MCA agreement, and the court docket. Many MCA default judgments in New York were obtained through confessions of judgment, which are entered by the clerk without any judicial review. Others were obtained in adversarial proceedings where the defendant simply failed to appear. The procedural history determines which challenge routes are available and under what timeline.
Step 2: Calculate Whether the Judgment Is Potentially Void
New York amended its confession of judgment statute in 2019 to prohibit confessions of judgment against non-residents of New York. If you operated a business outside New York and an MCA company filed a COJ against you in New York courts after 2019, that judgment may be void on its face regardless of the merits of the underlying claim. Courts have granted vacatur on this ground alone, without any inquiry into whether the debt was valid. The Yellowstone settlement in January 2025 vacated more than a thousand such judgments as part of its resolution — a scale of relief that illustrates how systematic the problem had become.
Step 3: Move to Vacate Under CPLR 5015
New York’s CPLR Section 5015 provides the procedural vehicle for vacating a judgment. The available grounds include excusable default (which requires both a reasonable excuse for failing to appear and a potentially meritorious defense), fraud or misrepresentation in the obtaining of the judgment, and newly discovered evidence. For confessions of judgment, additional grounds include defects in the supporting affidavit and the non-residency prohibition. The motion must be made within a reasonable time, with an outer limit of one year for excusable default claims.
Step 4: Oppose Any Enforcement Actions Immediately
While a vacatur motion is pending, the funder may move to enforce the judgment through bank levies, asset restraints, or income execution. You can seek a stay of enforcement proceedings while the vacatur motion is heard. Courts are generally willing to stay enforcement where a vacatur motion raises substantial legal questions, because the harm from premature enforcement — a depleted bank account, a seized asset — is difficult to reverse. The stay motion should be filed at the same time as or immediately after the vacatur motion.
Step 5: Assert Affirmative Defenses and Counterclaims
Vacating the default judgment reopens the underlying action. That reopening creates the opportunity to assert defenses and counterclaims that were forfeited when the default was entered. In the MCA context, those include the usury defense, RICO counterclaims, and UDAP claims. This is the moment where a defensive proceeding becomes an offensive one — not always, and not without risk, but the option exists and the economics can shift considerably when treble damages are on the table.
Step 6: Demand Release of Any UCC Liens Upon Resolution
Settlement or vacatur of a default judgment does not automatically terminate the UCC-1 financing statement the funder filed when the agreement was executed. That lien remains on record until formally terminated. Any resolution — whether by settlement, vacatur, or judgment in your favor — must include a written agreement that the funder will file a UCC-3 termination statement within a specific timeframe, and you should verify that the filing was made. A lien that remains on record after the debt is resolved will prevent future financing and may cloud asset transfers for years.
