Restraining notices and bank levies after an MCA judgment

The payroll file rejected. The company card declined at the fuel pump. Your bank's business line says there is a legal order on the account and they cannot tell you more.

That is a restraining notice, and it means a judgment already exists. Understanding the sequence tells you what is coming next and where the actual leverage is.

Nothing here happens without a judgment

This is the first thing to establish, because it eliminates half the fear people carry.

A merchant cash advance funder cannot reach into your bank account on the strength of the contract, the UCC filing, or a threatening letter. It needs a judgment. That judgment can arrive three ways: you were sued and lost, you were sued and did not answer so a default judgment was entered, or you signed a confession of judgment at funding and it was filed.

The third route is why so many owners are surprised. There was no lawsuit they experienced.

So question one is not "how do I unfreeze this." It is "what judgment is this, entered where, on what date, in what amount." Your bank will not tell you, but the legal process department will confirm the case name and index or docket number if you ask for exactly that. Court records do the rest.

The restraining notice

In New York, which is where a large share of MCA judgments live, the device is CPLR 5222. Three features matter.

It does not require a judge. A judgment creditor's attorney, as an officer of the court, can serve a restraining notice without any further court order.

It reaches twice the judgment. Served on a bank, the restraint applies to funds up to twice the amount due on the judgment, which is why an account with a comfortable balance can go entirely dark over a smaller judgment.

It lasts. Served on a garnishee such as a bank, it remains effective for one year, or until the judgment is satisfied or vacated.

There is a companion provision worth knowing. CPLR 5251 treats a judgment debtor's violation of a restraining notice as punishable as contempt. Moving restrained funds is not a gray area.

Other states use different names, writ of garnishment being the most common, with the same architecture: freeze, then take.

How they find the accounts

Creditors are not guessing. Information subpoenas, in New York under CPLR 5224, go out to banks, processors and sometimes to your customers, demanding account information under oath.

The funder also already knows a great deal. It underwrote your file from bank statements. It has your routing and account numbers from the ACH authorization. It knows your processor.

And under UCC 9-406, a secured party with an assignment of your accounts can notify the parties who owe you money to pay it directly. For a business billing customers on terms, that reaches money that never touches your bank at all.

From restraint to levy

The restraint holds the money. The levy takes it.

In New York that runs through CPLR 5232, with an execution delivered to a marshal or sheriff who serves it on the bank. Where property is held by a third party who will not turn it over, the creditor brings a turnover proceeding under CPLR 5225.

The gap between restraint and levy is typically days to a few weeks. It is not a lot of time, and it is the window in which a negotiated release is possible.

What is protected, and what is not

Business accounts: almost nothing. Statutory protections are written for natural persons. A corporation or LLC does not get an exemption for operating funds, payroll reserves, or sales tax collected and not yet remitted. The account can go to zero.

Personal accounts: more, but it is limited and it is state specific. New York's Exempt Income Protection Act, CPLR 5222-a, requires banks to protect a minimum balance tied to the state minimum wage, to protect ninety percent of the last sixty days of earnings deposited, and to send exemption claim forms to the account holder. Deadlines to return those forms are short.

Federal benefit deposits. Treasury's rule at 31 CFR Part 212 requires a bank served with a garnishment order to look back two months and protect directly deposited federal benefits such as Social Security. This is automatic on the bank's side and does not depend on you filing anything.

Wages. Title III of the Consumer Credit Protection Act, 15 U.S.C. 1673, caps garnishment of disposable earnings at 25 percent or the amount over thirty times the federal minimum hourly wage, whichever is less. Some states bar wage garnishment for ordinary debts entirely.

The first seventy two hours

1. Identify the judgment. Case name, court, index or docket number, date entered, amount. Ask the bank's legal process department for it.
2. Stop the cascade. Every ACH scheduled against a restrained account will return, each generating fees and, for vendors, a second problem. Contact critical vendors before the returns land.
3. Do not move money out of a restrained account. See CPLR 5251. Separately, transferring assets ahead of a creditor invites a claim under the Uniform Voidable Transactions Act, adopted in most states, and turns a collections case into an allegation of intentional evasion.
4. Get the documents to counsel. The funding agreement, the guaranty, the confession of judgment if there is one, the restraint paperwork, and the last six months of statements. Experienced MCA defense counsel handles the enforcement fight, and we work the negotiation with the funder alongside it.
5. Deal with payroll separately and lawfully. Payroll obligations do not pause, and unpaid wages create liability that outlasts the judgment.

Why the first restraint is rarely the last

Owners sometimes see a restraint expire or an account come back to life and assume it is over. It is usually a pause.

A judgment survives for years. In New York a money judgment is generally enforceable for twenty years, and the judgment lien against real property runs ten years with an extension available. Most states allow renewal.

Meanwhile the balance grows. Post judgment interest accrues at the statutory rate, which in New York is 9 percent per year for most judgments, and enforcement costs get added.

Creditors also re serve. A restraining notice served on a bank runs for a year. Nothing prevents another one after that, or restraints served on a second and third bank as information subpoenas reveal them.

And where multiple funders hold advances, judgments arrive in sequence rather than together. Resolving one restraint while three other files march toward judgment buys weeks, not resolution. That is the argument for treating the stack as one problem rather than handling whichever creditor shouted most recently.

Getting a restraint released

Four doors, in rough order of how often they open.

Negotiated release. Creditors routinely agree to release a restraint as part of a payment arrangement or settlement, because a frozen account produces nothing while a working business produces payments. This is the most common practical outcome and it is a negotiation we handle directly.

Exemption claim. Where the account is personal and exempt funds are in it, the claim form process exists for exactly this. Deadlines are measured in days.

Motion practice. Vacating the judgment or challenging the enforcement on procedural grounds. Real, narrow, and attorney work.

Satisfaction. Paying the judgment in full ends it.

The step to take today is the boring one: get the case number. Everything available to you, from an exemption claim to a settlement conversation, requires knowing which judgment you are dealing with, and that single piece of information is usually one phone call away.