Top 3 Ohio MCA Debt
Relief Lawyers

Best Ohio MCA Debt Relief Lawyers: What the Right One Does Once a Funder Moves

The best MCA Debt Relief Lawyers in Ohio know how to work within the timelines provided by the cognovit statute and can file in the correct county court within a few days, and they know how to defend a New York judgment filed here in Ohio.

A lot of business owners don’t realize that they have a judgment against them because funders use the Ohio Cognovit process to obtain one without the owner knowing a case was filed. If you need to negotiate your MCA debt, look at our guide to the best business debt settlement companies in Ohio.

When do you need an MCA defense lawyer in Ohio?

You need a lawyer for this process as soon as the funder uses one of these three routes, and each route has its own deadline:

Can an MCA funder obtain a judgment in Ohio without filing a lawsuit?

Yes, if you signed an MCA agreement that included a “warrant of attorney” that is compliant with R.C. 2323.13, the MCA funder can have their attorney “confess” the judgment. You will receive notice from the court after the judgment has been entered. In the few reported cases, the judgment is entered the same day the case is filed. See, e.g., Henry County Bank v. Stimmels and Park View Federal Savings Bank v. Village Builders.

The cognovit process is strictly construed against the creditor, and the statute gives our lawyers a few defenses:

1. The statute requires a specific warning directly above or below the signature lines, more conspicuous than any other part of the document: “By signing this paper you give up your right to notice and court trial.”
2. If there is a municipal court where one of the makers lives or signed the note and the amount is within its $15,000 limit, the judgment must be confessed in that court; otherwise it must be confessed in the county where the note was signed or one of the makers lives, “notwithstanding any agreement to the contrary.” This means a New York forum clause cannot move an Ohio cognovit to New York.
3. The funder’s attorney must file the original warrant of attorney. The Tenth District held in Ltd. Investment Group v. Huntington National Bank that if the original was not filed, the judgment was void, but the creditor could refile once it produced the original.

A couple of other defenses are specific to MCAs. The Third District held in Henry County Bank v. Stimmels that a cognovit judgment can only be obtained for failure to pay and not for other defaults, such as a default under an “insecurity” clause. Most MCAs go into default for reasons other than failure to pay (e.g. stopping an ACH, moving to a new bank), so this defense may apply. It is not clear, however, whether the other districts will follow the Third District. Another defense is that only terms in the instrument that includes the cognovit warning can be confessed. If a renewal or addendum lacks the warning, it may not be confessed.

Is it possible to vacate a cognovit judgment in Ohio?

It’s possible by filing a motion to vacate pursuant to Civ. R. 60(B). Most Ohio courts require a borrower to show a meritorious defense and a timely motion. The motion must be filed within a year for claims of mistake, new evidence, or fraud. Civ. R. 60(B) does not stay collection efforts. An attorney must separately move for a stay under Civ. R. 62(A), which the court can condition on security.

In Bruner Holdings v. Sleeper the Tenth District provided a nonexhaustive list of defenses to a confession of judgment, including payment, improper conduct to obtain the signature, departures from the procedure to confess judgment, and a dispute of the amount due. You must at least allege a defense. A dispute only over the amount may get a hearing on the amount rather than vacatur. In reported cases, borrowers have moved to vacate 3, 8, and 28 days after judgment. Unfavorable deal terms are not a defense. In SHJ Co. v. Avani Hospitality the trial court held that a borrower now disfavoring the loan terms was “not a sufficient reason.”

What happens in Ohio if your MCA contract says New York?

A New York fund will usually sue you in New York, and then file the judgment in the Ohio common pleas court. New York no longer permits confessions of judgment against nonresidents since 2019. See New York CPLR 3218(b).

If a New York judgment is filed in an Ohio common pleas court, it is subject to “the same procedures, defenses, and proceedings for reopening, vacating, or staying” as a judgment of the common pleas court under R.C. 2329.022. The 30-day waiting period before a fund can execute gives an Ohio attorney time to coordinate with a New York attorney to attack the judgment.

Does Ohio usury law help against a merchant cash advance?

It is very rare that a borrower can claim usury under Ohio law. The default Ohio usury rate is 8%, but a borrower can contract around it if the loan is greater than $100,000 or if it is a business loan to a company or sole proprietorship. See R.C. 1343.01. Corporations cannot even raise usury as a defense under R.C. 1701.68. Finally, the criminal usury rate of 25% under R.C. 2905.21 does not apply if the rate is “otherwise authorized by law.”

Recharacterizing a Merchant Cash Advance as a loan happens under the law governing your agreement, often New York law.

What can an MCA funder take from you in Ohio after a judgment?

They will normally seek to take your bank accounts first. Under R.C. 2716.13, once they file for garnishment, everything in your account greater than $400 will be subject to the garnishment order. The court must hold a hearing within twelve days after you request one, and you must request it by the end of the fifth business day after receipt of notice. In First Financial Bank v. Tailored Fund Capital, the MCA funder withdrew $3,644,922 from one business account. The bank’s conversion claim against the funder failed.

If you are a personal guarantor, your home is exempt up to $125,000, cash and bank deposits up to $400, and the greater of 75% of your disposable wages or a multiple of the federal minimum wage under R.C. 2329.66. The Ohio Judicial Conference increases the dollar amounts every third April to account for inflation, so ask your attorney for a chart of the currently indexed amounts.

How do you vet the best Ohio MCA debt relief lawyers?

Check registration and discipline in the Supreme Court of Ohio’s Attorney Directory Search. Then ask if they can immediately answer:

• Where will my case be filed if I was cognovitted (where I live or where I signed)?
• Does the MCA contain the warning required by 2323.13(D)? Do the addendums contain a similar warning?
• Does your court allow a cognovit judgment for reasons other than nonpayment? (Henry County in the 3rd District only allows nonpayment.)
• Will you file a stay of execution under Civ.R. 62(A) and request a garnishment hearing within five business days?
• Can my case go to a commercial docket in common pleas? (Courts with six or more general division judges or in a county of more than 300,000 may establish commercial dockets under Sup.R. 7.41.)

In Ohio State Bar Association v. Watkins Global Network, the Supreme Court of Ohio held that relaying settlement offers to small businesses was not practicing law, but fined the nonlawyer $1,000 for advising a church about its foreclosure. A settlement company may relay offers, but to file a 60(B) motion, request a stay or answer a lawsuit you will need a lawyer licensed in Ohio.

Frequently Asked Questions

How long do I have to answer an MCA lawsuit in Ohio?

Ohio Civil Rule 12(A) gives you 28 days after you have been served a summons and complaint to serve an answer.

Can a New York confession of judgment be filed against an Ohio business owner?

No. New York’s CPLR 3218(b) allows a confession of judgment to only be filed in the county in which you resided at the time you signed it. If you were an Ohio business owner, they needed a cognovit in Ohio that complies with R.C. 2323.13.

Does filing a motion to vacate stop an Ohio bank garnishment?

No. Ohio Civ.R. 60(B) states that filing a 60(B) motion does not suspend the judgment. To stop the garnishment, your lawyer needs to file a request for a stay under Civ.R. 62(A) and request a garnishment hearing within five business days of notice of the garnishment.

Can a funder confess judgment because I changed bank accounts?

The Third District held in Henry County Bank v. Stimmels that a cognovit judgment could only be filed for default of nonpayment. It is unclear whether other districts in Ohio would follow Stimmels.