How to Vacate an MCA Judgment in New York

If you have just discovered that a merchant cash advance lender obtained a default judgment against your business in a New York court, the consequences are likely already unfolding. Your bank account may be frozen. A sheriff or city marshal notice may have arrived at your office. Daily ACH withdrawals may have stopped—only because your operating account has been swept clean. By the time most owners learn they were sued, the lender has already secured a judgment, served a restraining notice on the bank, and begun enforcement against business assets.

Under New York law, a default judgment is not the end of the road. Through a motion under New York Civil Practice Law and Rules (CPLR) 5015, business owners can ask a court to vacate the judgment, reopen the case, and present a defense to the underlying merchant cash advance contract. Done correctly—and quickly—vacatur can pause enforcement, release frozen funds, and create real leverage to settle or fight on the merits. This guide walks through how vacatur works in New York, the legal grounds courts will accept, the deadlines that govern the motion, and the practical steps required to stop an MCA lender from draining the business while you respond.

What It Means to Vacate an MCA Judgment

To “vacate” a judgment is to ask the court to set it aside as if it had not been entered. The case is reopened. The defendant—typically the business and any personal guarantor—regains the right to answer the complaint, raise affirmative defenses, and contest the lender’s claims on the merits.

In New York, the primary vehicle for vacating a default judgment in commercial litigation is CPLR 5015(a). The statute lists five recognized grounds for relief from a judgment or order:

• excusable default;
• newly discovered evidence;
• fraud, misrepresentation, or other misconduct of an adverse party;
• lack of jurisdiction to render the judgment or order; and
• reversal, modification, or vacatur of a prior judgment on which the current judgment was based.

CPLR 317 provides a separate basis for relief when a defendant did not personally receive the summons in time to defend. This is especially relevant in MCA cases, where service is often made on out-of-state businesses through the New York Secretary of State, on outdated registered-agent addresses, or on individuals who never actually receive the papers.

A successful motion does two things at once. It eliminates the judgment as a basis for ongoing enforcement, and it forces the lender to actually litigate the case—something many MCA funders are unwilling or unable to do once a matter becomes contested.

Why MCA Judgments Happen So Often in New York

New York is the dominant venue for MCA litigation, and not by accident. Most merchant cash advance contracts include forum selection clauses naming New York courts and choice-of-law clauses applying New York law. As a result, a small business in Florida, Texas, or California that signed an MCA agreement can find itself sued in Erie, Orange, Westchester, or Kings County—thousands of miles from where it actually operates.

Several structural factors make default judgments unusually common in this setting:

Service issues. MCA defendants are routinely served by mail at outdated addresses, through registered agents that no longer represent the business, or via the Secretary of State without effective forwarding. By the time the business learns it has been sued, the response window has closed.

Confession-of-judgment history. Before New York amended CPLR 3218 in August 2019, MCA lenders nationwide used confessions of judgment to skip litigation entirely—filing the signed confession in a New York county clerk’s office, obtaining a judgment in days, and domesticating it in the debtor’s home state. The 2019 amendment limited this practice by requiring the debtor to be a New York resident at the time of execution, but pre-2019 confessions remain enforceable, and contested service issues still arise.

High-volume default filings. A small group of MCA funders files lawsuits in volume across New York counties. When a defendant fails to appear, the lender requests a clerk’s default and obtains judgment with limited judicial review of the underlying contract.

The result is a steady pipeline of judgments entered without any meaningful opportunity for the business to be heard. Vacatur is the corrective.

Legal Grounds to Vacate an MCA Judgment

A motion to vacate must be supported by a recognized legal basis. The strongest motions combine a procedural ground (such as improper service or excusable default) with a substantive ground (a meritorious defense to the underlying contract). Courts generally require both.

Lack of Proper Service

Improper service is the most powerful basis for vacating an MCA default judgment. Under CPLR 5015(a)(4), a court must vacate a judgment entered without personal jurisdiction. If the lender failed to serve the summons in compliance with CPLR 308, 311, or any applicable long-arm provision, the judgment is void.

Common service defects in MCA cases include:

• service on a non-existent or stale business address;
• service on an individual not authorized to accept process;
• service via the Secretary of State without proper follow-up mailing under Business Corporation Law § 306 or LLC Law § 303;
• “nail and mail” substituted service without the due diligence required by CPLR 308(4); and
• affidavits of service that misstate the date, location, or recipient of process.

Service challenges are typically supported by sworn affidavits from the defendant denying receipt and contemporaneous evidence—mail logs, address records, lease documents, prior correspondence with the funder—demonstrating that the address used was incorrect or that the person served had no authority to accept.

Excusable Default Under CPLR 5015(a)(1)

To vacate under CPLR 5015(a)(1), the moving party must establish both a reasonable excuse for the default and a meritorious defense. This motion must be made within one year of service of a copy of the judgment with notice of entry.

Courts have accepted a range of excuses, including:

• illness or hospitalization of the principal during the response window;
• loss of mail, mail forwarding errors, or service confusion;
• reliance on counsel who failed to appear or withdrew without notice;
• business disruption such as relocation, closure, ownership change, or natural disaster; and
• documented law-office failure under CPLR 2005.

A bare claim of being too busy or overwhelmed will not suffice. The excuse must be specific, supported by sworn testimony, and reasonable under the circumstances.

Meritorious Defense

Even with a strong procedural ground, the court will require a showing that the business has a real defense to the underlying claim. In MCA matters, common meritorious defenses include:

Disguised loan and criminal usury. New York treats interest above 25% per year as criminal usury under Penal Law § 190.40. While true MCA contracts are not loans, courts increasingly examine whether a particular agreement is, in substance, a loan with disguised interest. Appellate authority has set out three factors that courts weigh: whether the agreement contains a meaningful reconciliation provision, whether it has a finite term, and whether the funder has any recourse against the merchant if the business fails through no fault of its own. When all three factors favor the merchant, courts have held the agreement to be an unenforceable loan.

Reconciliation breach. Most MCA contracts promise the merchant a right to reconcile fixed daily payments against actual receivables. Funders that refuse reconciliation requests, ignore documentation, or impose unreasonable conditions may have breached the contract—undermining their right to enforce it and supporting reclassification as a loan.

Fraud or misrepresentation. Misstated effective rates, undisclosed fees, false promises during sales calls, or misrepresentations about the nature of the agreement can support a fraud defense both as a basis for vacatur under CPLR 5015(a)(3) and as an affirmative defense once the case is reopened.

Unconscionability and stacking. Provisions imposing default fees, NSF fees, blocked-account fees, and acceleration on top of stacked advances can be challenged as procedurally and substantively unconscionable under New York contract law.

For a deeper look at how usury and contract defenses are raised, see our analysis of MCA usury defenses in New York and how to challenge an MCA contract.

Fraud or Misconduct by the Lender

Under CPLR 5015(a)(3), a judgment can be vacated when obtained through fraud, misrepresentation, or other misconduct. Examples in MCA cases include false affidavits of service (“sewer service”), misstated receivables figures in the complaint, undisclosed satisfaction of the obligation prior to judgment, and submission of fabricated reconciliation correspondence. Courts treat these claims seriously, and supporting documentation—bank statements, ACH logs, sworn correspondence—is often dispositive.

New York’s Legal Landscape Favors Careful Review

New York courts have grown increasingly skeptical of aggressive MCA enforcement. Decisions out of the Appellate Division have refined the framework for separating true purchase-of-receivables agreements from disguised loans. The New York Attorney General has investigated MCA practices and entered into settlements with funders engaged in misrepresentation, abusive confessions of judgment, and false affidavits of service. The Federal Trade Commission and Consumer Financial Protection Bureau have brought parallel enforcement actions against industry participants.

This landscape matters for vacatur in two ways. First, it gives commercial part judges a doctrinal framework for taking MCA defenses seriously, particularly when criminal-usury rates and reconciliation breaches are pleaded with specificity. Second, it gives defense counsel real leverage to push for settlements once a judgment is vacated and the case becomes a contested fight rather than an uncontested filing.

If the contract includes a personal guarantee or a confession of judgment executed before August 2019, additional analysis is needed. Pre-amendment confessions remain enforceable, but they are increasingly subject to challenge based on fraud, miscalculation of amounts due, improper filing, or service deficiencies in any subsequent enforcement proceeding.

Deadlines and Timing: Why Speed Matters

Time is the central enemy of a vacatur motion. Each statutory ground has its own clock:

• CPLR 5015(a)(1) excusable default: one year from service of the judgment with notice of entry.
• CPLR 5015(a)(4) lack of jurisdiction: no fixed statutory deadline, but laches applies and significant delay can be fatal.
• CPLR 317 lack of personal notice: up to one year after the defendant learns of the judgment, with an outer limit of five years from entry.

More important than any statutory clock is the enforcement clock. Once a judgment is entered, the lender can within days:

• serve a restraining notice on every bank holding business funds;
• file an information subpoena to identify accounts, receivables, and assets;
• direct a sheriff or city marshal to levy specific accounts under CPLR 5232;
• record the judgment as a lien against real property; and
• domesticate the judgment in the debtor’s home state through the Uniform Enforcement of Foreign Judgments Act.

By the time enforcement is in full swing, the business may have lost the cash flow it needs to operate, retain counsel, or fund the very motion that could undo the damage. Acting before the operating account is drained—or immediately after a restraining notice is served—dramatically improves outcomes.

Step-by-Step: How to Vacate an MCA Judgment in New York

The mechanics of a CPLR 5015 motion are straightforward in concept and exacting in execution. The following sequence applies in most commercial parts.

1. Obtain the complete court file. Order the judgment roll from the county clerk where the judgment was entered. The file should include the summons and complaint, the affidavit of service, any confession of judgment, the application for default, and the judgment itself with notice of entry.
2. Identify the legal basis. Review the file for service defects, premature default applications, mathematical errors in the judgment amount, and any indication of fraud or misrepresentation. Cross-reference the affidavit of service with the actual address records of the business and any individual guarantor.
3. Gather supporting evidence. Collect sworn affidavits from the principal, the registered agent, and anyone with personal knowledge of the contract, the alleged default, or the service attempt. Bank records, ACH logs, written reconciliation requests, and email correspondence with the funder all support the meritorious-defense element.
4. Draft the motion. A typical CPLR 5015 motion includes a notice of motion (or order to show cause for emergency relief), an attorney affirmation, a sworn affidavit from the defendant addressing both the excuse and the defense, a memorandum of law, and a proposed order. Many motions also seek a stay of enforcement under CPLR 5519 pending the court’s decision.
5. Request emergency relief when needed. When enforcement is imminent or already underway, counsel can move by order to show cause and request a temporary restraining order halting bank levies, account restraints, or marshal action while the motion is pending.
6. Appear and argue. Most commercial parts hear motions on the regular calendar. Some judges will refer disputed service questions to a traverse hearing, where the process server testifies and the defendant presents evidence rebutting the affidavit of service.

A well-prepared motion, supported by clear evidence, frequently results in vacatur on consent or after limited briefing. For a procedural overview of how cases reach the default stage in the first place, see our guide to MCA default judgments in New York.

What Happens After You Vacate the Judgment

Vacatur is a beginning, not an ending. Once the judgment is set aside, several things happen in sequence.

The case is reopened. The defendant typically has a court-set window—often 20 or 30 days—to file an answer with affirmative defenses and counterclaims. From this point forward, the lender must prove its case under New York’s pleading and evidentiary rules.

Enforcement stops. Restraining notices on bank accounts are released. Sheriff and marshal levies are unwound. Pending information subpoenas may be withdrawn or stayed. Frozen funds are returned, sometimes within days of the order.

The leverage shifts. MCA funders that rely on default volume rarely have the appetite or the litigation budget to fully prosecute a contested case. Once vacatur is granted, settlement becomes a realistic option, often at deep discounts to the face amount of the judgment.

In some cases, vacatur leads to dismissal of the underlying lawsuit on the merits. Dismissal might rest on improper service that cannot be cured, expiration of the statute of limitations, criminal usury, or material breach of the reconciliation provision.

Can You Stop a Bank Levy After Judgment?

Yes—but speed and the right legal vehicle matter. Several tools are available to interrupt enforcement:

• a motion to vacate combined with a request for a stay of enforcement under CPLR 5519;
• an order to show cause with a temporary restraining order halting marshal or sheriff action;
• a claim of exemption for funds traceable to exempt sources (Social Security, SSI, certain federal benefits, or two months’ worth of statutorily protected funds under CPLR 5222(h)); and
• negotiation with the levying officer or judgment creditor’s counsel for a temporary release pending motion practice.

The CPLR also permits vacatur of restraining notices and turnover orders that are defective on their face—for example, those served without supporting information subpoenas or those targeting accounts not belonging to the judgment debtor.

For step-by-step guidance on freeing a frozen account, see our guide to stopping an MCA bank levy in New York and what to do when an MCA lender freezes your bank account. For ongoing daily withdrawals draining the operating account, see our guide to stopping MCA ACH withdrawals.

When to Contact an MCA Defense Attorney

The legal questions in MCA defense—jurisdiction, service, usury, contract construction, confession-of-judgment law—are technical, and the deadlines are short. Business owners who try to file CPLR 5015 motions pro se often miss procedural requirements, file in the wrong part, or fail to obtain emergency relief in time to stop a bank levy.

If you have received any of the following, contact a New York MCA defense attorney as soon as possible:

• a summons and complaint in a New York court;
• a notice of entry of judgment;
• a restraining notice from your bank;
• an information subpoena seeking financial records;
• a marshal’s or sheriff’s notice of levy; or
• a domesticated New York judgment served in your home state.

Early intervention preserves options. Counsel can often negotiate a hold on enforcement while the vacatur motion is prepared, file an order to show cause within days, and coordinate with the bank to release funds once a stay is entered.

Learn more about our New York MCA defense practice, how we handle MCA lawsuits in New York, and the broader framework of New York MCA law. When the goal is dismissal rather than settlement, our guide to dismissing an MCA lawsuit in New York walks through the most effective procedural and substantive grounds.

Frequently Asked Questions

Can I vacate an MCA judgment in New York?

Yes. New York courts can vacate default judgments under CPLR 5015(a) for excusable default, lack of jurisdiction, fraud, or other recognized grounds, and under CPLR 317 when a defendant did not personally receive the summons. The strength of the motion depends on the procedural defects, the merits of the underlying defense, and how quickly the motion is filed after entry of the judgment.

How long do I have to vacate a default judgment?

Excusable-default motions under CPLR 5015(a)(1) must be filed within one year of service of the judgment with notice of entry. Motions based on lack of jurisdiction (CPLR 5015(a)(4)) are not subject to a fixed statutory deadline but should be filed promptly to avoid laches. CPLR 317 motions can be made up to one year after learning of the judgment, with an outer limit of five years from entry.

What is CPLR 5015?

CPLR 5015 is the section of New York’s Civil Practice Law and Rules that governs relief from a judgment or order. It lists five grounds: excusable default, newly discovered evidence, fraud or misconduct, lack of jurisdiction, and reversal of an underlying judgment. It is the primary statute used to vacate MCA default judgments in New York.

Can a judgment be removed after a bank levy has started?

Yes. Vacating the judgment terminates its enforceability and unwinds restraining notices and levies based on it. When enforcement is already underway, counsel typically files the vacatur motion together with an order to show cause seeking a temporary restraining order to stop the levy and release frozen funds while the motion is pending.

Do MCA lenders win automatically once they file in New York?

No. Default judgments are common because many defendants do not respond, but they are not automatic. When a defendant appears, raises usury or other defenses, and litigates the case, MCA funders frequently struggle to prove their claims—particularly when the contract lacks a meaningful reconciliation provision or when the effective rate exceeds 25% per year.

Will vacating the judgment stop the lawsuit entirely?

Not by itself. Vacatur reopens the case so the defendant can answer and defend. The lawsuit continues, but on contested terms. Many MCA cases resolve at this stage through settlement at a substantial discount, dismissal on the pleadings, or summary judgment for the defendant on usury grounds.

Can I vacate a judgment based on a pre-2019 confession of judgment?

Often, yes. Pre-amendment confessions remain enforceable in concept, but they are increasingly subject to challenge. Common grounds include fraud in the underlying transaction, miscalculation of amounts due, defective filing in the wrong county, lack of authority to execute the confession, and service deficiencies in any subsequent enforcement proceeding. Each pre-2019 confession should be reviewed individually.

Acting Before Enforcement Closes the Door

A New York default judgment in an MCA case is serious, but it is not final. CPLR 5015 and CPLR 317 give business owners real tools to reopen the case, present a defense, and stop the bank levies, restraining notices, and marshal actions that follow judgment entry. The defenses themselves—improper service, excusable default, criminal usury, breach of reconciliation, fraud—are well-developed in New York case law and are taken seriously by commercial part judges.

What separates outcomes is speed. Every day a judgment sits unchallenged is another day for the lender to drain accounts, file liens, and domesticate the judgment in other states. Business owners who act in the first week after learning of a judgment—retaining counsel, ordering the court file, preparing affidavits, and filing for emergency relief where appropriate—preserve options that disappear later.

If your business is facing MCA enforcement in New York, do not wait for the next bank statement. Contact a New York MCA defense attorney today to evaluate your case and file the motions that can protect your business.

Authority and References

New York Unified Court System: nycourts.gov · New York Attorney General: ag.ny.gov · Federal Trade Commission — Small Business Lending: ftc.gov · Consumer Financial Protection Bureau: consumerfinance.gov

This article is for general informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship. New York MCA litigation is fact-specific; deadlines and outcomes depend on the particular contract, court, and circumstances. Business owners facing enforcement should consult a licensed New York attorney before taking action.