The call usually comes from a bookkeeper: cards are declining and the bank says the account is restrained. For a business that makes payroll on Friday, this is not a billing dispute, it is an emergency. Here is what has actually happened, and what the first days look like.
A restraint is not a payment
When a funder holds a judgment against your business, it can serve a restraining notice on your bank. The bank freezes funds up to roughly twice the amount claimed and holds them. The money has not been handed over yet, which matters: funds that are restrained can still be argued about, while funds already turned over are far harder to recover. That gap is the window to act in.
Where the judgment came from
Many merchant cash advance agreements contain a confession of judgment, signed at funding, that allows a judgment to be entered without a lawsuit and without notice to you. Owners routinely learn a judgment exists only when the account stops working. New York has narrowed this practice, but older agreements and out-of-state filings still surface. The first question we ask is where the judgment was entered, when, and on what paperwork.
What decides the outcome
Three things tend to matter more than argument:
- The agreement itself. Whether the transaction was a true purchase of receivables or a disguised loan is a question courts examine through reconciliation rights, the term, and who truly bears the risk of a slow month.
- What was actually taken. A clean ledger of every debit, fee and default charge, compared to what the contract permitted.
- Speed. Relief sought while funds are restrained is a different conversation from relief sought after they are gone.
What to gather before the first call with a lawyer
The funding agreement and every amendment, the bank statements showing the debits, any default or demand letters, the restraining notice if the bank sent one, and the names of any other funders. Owners often have several advances stacked; the order they were taken affects strategy.
What can be done
Depending on the facts, the paths include moving to vacate a judgment entered on a defective confession, challenging the restraint itself, raising the loan-versus-purchase question, and negotiating a structured resolution that the business can actually carry. We also deal with personal guaranties, because funders frequently pursue the owner as well as the company.
If an account has been restrained, time is the one resource you cannot get back. Talk to an attorney about where the judgment came from and what can still be moved.
