Arizona Businesses With an Account Restrained Over an MCA

Payroll is Friday and the account stopped working on Tuesday

This is the version of a merchant cash advance problem that arrives without any paperwork at all. Nobody serves you. The bank declines a transfer, or a card payment fails, and when you call, someone reads you a sentence about a restraint and cannot tell you much more than that.

There are two problems in that moment and they are not the same size. The urgent one is the account. The important one is the judgment underneath it. Treating them as a single problem is how the week gets worse.

What a restraining notice is, and why nobody warned you

CPLR § 5222 is the instrument. A restraining notice may be issued by the clerk of the court or by the judgment creditor's attorney as an officer of the court, and served upon any person — which includes a bank — holding property in which the judgment debtor has an interest.

Three things follow from that sentence, and they explain the whole experience:

• No judge signs it at that moment. It is issued and served, not applied for.
• It goes to the bank, not to you. Which is why the bank is how you find out.
• The bank is complying, not deciding. Arguing with the branch achieves nothing, because the branch has no discretion to give back.

Holding is not the same as taking

A restraint stops money moving. Getting it is a further step, and New York makes that step a proceeding. CPLR § 5225 lets a judgment creditor move, on notice to the judgment debtor, for an order that the debtor pay over money or deliver other personal property in which the debtor has an interest, where that is shown.

The practical consequence is that there is a gap between the freeze and the loss, and it is a gap with a notice requirement in it. That gap is where the work gets done.

The three facts to get out of the bank today

Ask in writing, and ask for exactly these:

1. The judgment creditor's name. Often not the funder you remember dealing with.
2. The county. New York judgments live in a county clerk's office and the file is found by it.
3. The index number. This is the one that makes everything else lookup-able.

With those three, the judgment, the complaint, the affidavit of service and the date of entry can all be pulled and read. Without them, everyone is guessing.

What not to do, in order of how much damage it causes

• Do not move money between accounts. It is the most common reaction and it manufactures a second dispute, on worse facts, on top of the first.
• Do not open a new account and route receipts to it. Judgment creditors have information subpoenas available to them; this is a well-worn path and it is watched.
• Do not pay whatever number the creditor's office says on the phone. That figure has not been checked against the agreement or the debit history yet.

The lawsuit underneath, briefly

The judgment exists because an action was brought in New York, which the agreement selected, and because nobody appeared in it or because the appearance did not succeed. CPLR § 320 sets the appearance window at twenty days after service of the summons, with longer periods in defined circumstances including particular methods of service.

Whether that judgment is sound, and whether it was properly obtained, is the New York question and the one worth the most. What the judgment can reach inside an Arizona bank runs through Arizona procedure, which is counsel admitted there.

Where to read next

A restrained account goes into the mechanism in more detail. If the judgment appeared without a lawsuit you remember, a confession of judgment is usually how, and how an MCA lawsuit is defended covers the case itself.