The account was frozen on a Tuesday morning. Payroll was due on Friday. The landlord’s check was already in the mail. That was not a coincidence. The timing was the point.

An MCA company can freeze your bank account, but only through specific legal mechanisms. They cannot call your bank and request a freeze based on their status as a creditor. They cannot instruct the bank to hold your funds because you missed a payment. They need a court order or a judgment followed by a post-judgment remedy. The mechanism matters because the mechanism determines your response, your timeline, and your options.

How the Freeze Happens

The most common path to a frozen bank account in the MCA context starts with a confession of judgment. The funder files the confession, the court enters the judgment, and the funder’s attorney serves a restraining notice on your bank. Under New York CPLR 5222, a restraining notice is a post-judgment enforcement device that prohibits the bank from releasing funds in your account up to the amount of the judgment plus statutory costs.

The bank is legally required to freeze the account. The bank has no discretion. The bank did not choose to freeze your account. The bank did not make a judgment about your creditworthiness or your relationship with the funder. The bank received a legal document compelling it to restrain the funds, and the bank complied because the law requires compliance. Directing your frustration at the bank is understandable but unproductive. The bank is not the adversary.

The restraining notice applies to the account balance at the time it is served and to all deposits that arrive afterward, until the notice is lifted or the judgment is satisfied. This means incoming revenue — customer payments, credit card settlements, transfers, deposits — enters the account and becomes immediately restrained. The business continues to generate revenue, but the revenue is inaccessible. The operating account becomes a holding tank for the funder’s benefit.

Prejudgment Attachment

In some cases, the freeze occurs before judgment. A funder can seek a prejudgment attachment under CPLR Article 62, arguing that the debtor is about to dispose of assets or that the debtor is an out-of-state entity. Prejudgment attachment is more difficult to obtain than a post-judgment restraint because it requires a court order and a showing of specific grounds. But when granted, it freezes the account before there is any final determination of the dispute.

What You Can Do Immediately

First, determine the basis for the freeze. Contact your bank and obtain a copy of the restraining notice or attachment order. Identify the court, the case number, the plaintiff, and the amount claimed. Determine whether the underlying judgment is a confession of judgment — if it is, it may be subject to vacatur on the grounds discussed elsewhere.

Second, identify exempt funds. If the restrained account contains exempt assets — Social Security benefits, disability benefits, veterans’ benefits, child support, unemployment insurance, or other funds protected by federal or state law — those funds are exempt from restraint regardless of the judgment. New York law requires banks to automatically protect certain categories of exempt funds, but the protection is imperfect. If exempt funds have been restrained, you can file an exemption claim to release them.

Third, if the freeze is based on a confession of judgment, file a motion to vacate the judgment and simultaneously seek an emergency order releasing the restraint pending the motion. The emergency application — typically an order to show cause — asks the court to release the frozen funds on the grounds that the judgment is being challenged and that the continued restraint is causing irreparable harm to the business and its employees, customers, and creditors.

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Fourth, if you have other bank accounts that have not yet been restrained, take protective steps. This does not mean hiding assets — fraudulent transfer of assets to avoid a judgment creates additional legal problems. It means consulting with an attorney about what protective measures are legally permissible and strategically advisable.

Prevention

If you are in default or anticipate default on an MCA, the time to consult an attorney is before the freeze, not after. An attorney can take preemptive steps — including challenging the underlying agreement, negotiating a settlement, filing a preemptive lawsuit seeking declaratory relief, or taking other protective measures — that are more effective before the account is restrained than after.

Once the freeze is in place, the leverage shifts. The funder has your operating capital. The funder knows you cannot run the business without it. Every day the freeze continues, the business deteriorates. Negotiations conducted from a frozen-account position are negotiations conducted under duress. The time to act is when you still have options, not when the only option left is to capitulate.