Quick Summary
MCA borrowers often face two different liens at different stages of the debt. UCC liens are usually filed when you sign the MCA, and can cover all business assets. Judgment liens come later, but only after a lawsuit, and priority between liens affects what creditors can collect.
What Is a UCC Lien and How Does It Relate to MCAs?
UCC stands for the Uniform Commercial Code, which is a standardized set of laws that governs commercial and business transactions.
A UCC lien filing (sometimes called a UCC lien or UCC-1 filing) is a public record that a lender can file with the secretary of state when a business borrows money. This filing notifies others that the lender claims an interest in certain business assets. For example, with an equipment loan, the lien usually applies only to the specific equipment used as collateral.
In the MCA world, these liens are almost always filed the moment you sign the agreement. However, most MCA lenders file what’s called a blanket UCC lien, which places a claim on all of the company’s assets, including:
- Business equipment
- Inventory
- Bank accounts
- Future receivables
That last point matters. Even though MCAs are marketed as “purchases of future revenue,” MCA providers still protect themselves by filing liens that effectively tie up your business’s cash flow.
If you take out more than one MCA, you likely end up with multiple UCC liens. These liens compete with each other based on who filed first, not who is owed the most.
The result:
- New lenders may refuse to fund you
- Banks won’t extend credit
- Refinancing or selling assets becomes difficult
What Is a Judgment Lien and When Does It Apply?
A judgment lien is very different. It does not exist when you sign an MCA.
Instead, a judgment lien only appears after a creditor sues you for unpaid debt and wins the case. The court then enters a judgment against your business.
Once entered, a judgment lien can attach to business property and open the door to aggressive collection tactics, including bank account freezes, levies on assets, and garnishment of receivables.
In other words, judgment liens are not tied to a contract you signed. Rather, they are enforced through the court system only after being sued by a creditor.
UCC Liens vs. Judgment Liens—Key Differences
Understanding the difference between these two types of liens and how they impact your business is important. Here are some of the key ways UCC liens and judgement liens differ.
Timing
- UCC lien: Filed at signing
- Judgment lien: Filed after a lawsuit is won by a creditor
Purpose
- UCC lien: Secures repayment under a contract
- Judgment lien: Enforces a court judgment
Priority
- UCC liens filed first usually take priority
- Judgment liens typically come after existing UCC liens
That priority issue is critical. In most cases, a creditor with a judgment cannot jump ahead of a previously filed UCC lien when trying to collect from the same assets.
What Happens When You Have Both UCC and Judgment Liens?
Having both a UCC lien and a judgment lien puts your business in a high-risk position. It means multiple creditors are competing for the same limited assets.
This often starts with an MCA provider; they file a UCC -1 when you sign the agreement. Later, another lender or vendor sues you and wins a judgment. Now two different types of creditors are involved.
Both creditors may claim rights to the same assets, which leads to disputes over who gets paid first. Meanwhile, the business is stuck in the middle.
In most cases, the creditor who filed first has priority. That usually means the UCC lien comes before the judgment lien. If the UCC lien covers all business assets, the judgment creditor may be blocked from seizing assets already claimed by a higher-priority lien. But that doesn’t necessarily stop them from trying.
Judgment creditors often:
- Target assets not clearly covered by the UCC
- Go after bank accounts or incoming payments
- Apply pressure through freezes or levies
Meanwhile, the MCA provider may still be pulling daily or weekly payments, even as another creditor is trying to seize funds.
What about bankruptcy?
In bankruptcy, both UCC lienholders and judgment creditors have rights, but they’re treated differently. Secured creditors often have stronger positions, and priority matters even more. This is one reason it’s critical to seek legal advice before things spiral.
How to Address UCC and Judgment Liens on Your Business
Once liens are involved, ignoring them makes things worse. It’s important to take action as soon as possible. The goal is to understand what’s filed, who has priority, and what can be removed.
Step 1: Find Out Exactly What Liens Exist
Many business owners do not know how many liens are filed against them. So, start by pulling a UCC search under your legal business name and any DBAs.
Review each filing carefully. (Some liens stay on record even after the debt is paid.)
You should confirm:
- Who filed the lien
- When it was filed
- What assets it claims
- Whether it was ever properly released
For judgment liens, review court records and confirm the judgment amount, date, and creditor.
Step 2: Confirm Whether the Liens Are Valid
Not every lien is enforceable — some are improperly filed or overstated.
Common issues to watch out for include:
- Liens filed against the wrong entity
- Liens that claim assets not covered by the agreement
- Liens that should have been terminated after payoff
Improper filings can sometimes be challenged or removed. However, you’ll need the help of an attorney to challenge any liens you believe are incorrect.
Step 3: Negotiate Payoffs With Lien Releases Included
Paying a debt without a lien release is a common mistake. You should always confirm in writing that the lien will be removed before making a final payment. This applies to both UCC liens and judgment liens.
However, In many cases, you can also negotiate lien removal or release as part of a settlement, before the balance is fully paid. Keep in mind this requires the right strategy and documentation to be successful.
Before sending any money, request a written agreement that clearly states:
- The creditor will release or terminate the lien
- The amount required to do so
- The deadline for filing the release
- That the release will be filed with the appropriate agency (Secretary of State or court)
Again, it’s a good idea to work with an experienced business attorney who specializes in MCA and business debts with liens. Not only is negotiating a settlement complex and time-consuming, but you don’t want to sign any agreements that end up putting you in a worse financial spot than before. An experienced debt help attorney can negotiate on your behalf and ensure that whatever deal you work out is a win-win for your business and the creditor.
Step 4: Address Judgment Liens Strategically
Judgment liens require quick and careful handling. Once a creditor has a court judgment, they gain powerful collection rights, and they often use them aggressively.
Unlike UCC liens, judgment liens are enforced through the court system. That means a creditor doesn’t need your permission to act.
The first step is understanding exactly what the judgment allows, what assets it affects, and whether enforcement has already begun. Many judgment liens can be negotiated, especially if they’re preventing you from operating. In many cases, creditors are willing to accept a reduced lump-sum payment or structured settlement in exchange for releasing the lien, particularly if collection would be difficult or time-consuming.
The most important rule is to never pay without a written agreement confirming the lien will be released. Always negotiate a “pay-for-release” or settlement that includes a filed Satisfaction of Judgment or lien termination.
If the creditor is aggressive, the lien is blocking your business, or the debt involves a merchant cash advance or default judgment, getting expert legal help can make a major difference. With the right approach from an experienced attorney, many business owners are able to reduce the balance owed, remove the lien, and protect their business from further damage.
Step 5: Know When Bankruptcy Is the Right Move
Bankruptcy is not always the right move. But in some situations, it becomes an important option to understand.
When multiple liens are involved, especially judgment liens, the pressure on a business can escalate fast. Cash flow gets squeezed. Accounts get frozen. Creditors compete for limited assets. At a certain point, normal negotiation may no longer be enough.
That’s when bankruptcy enters the conversation.
One of the biggest reasons businesses consider bankruptcy is the automatic stay. Once a case is filed, most collection actions must stop, including bank account freezes, asset seizures, lawsuits, and other enforcement actions. This pause can give business owners breathing room to assess their options and stabilize operations.
However, bankruptcy has long-lasting consequences for your business and finances. And the matter can be complicated, depending on the type and number of liens. It’s highly recommended that you discuss the possibility of bankruptcy with a business attorney.
Legal Help Matters With Multiple Liens
If you’re facing multiple liens against your business assets, it’s important to have the right help on your side. Whether you need to dispute an improper filing, remove a lien after payoff, or negotiate with creditors, an attorney can protect your business interests.
Tayne Law Group has over two decades of experience helping business owners navigate debt issues, including UCC and judgment liens. Contact us at (866) 890-7337 or fill out our short contact form for a no-obligation, confidential consultation.
FAQ
What’s the difference between a UCC lien and a judgment lien?
A UCC lien is filed when you sign an MCA agreement. A judgment lien only exists after a creditor sues you and wins in court.
Can an MCA lender take my assets if they have a UCC lien?
Short answer: not automatically. But they may be able to under certain conditions.
A UCC lien does not mean the lender can immediately seize your assets. It simply gives them a legal claim to certain business property if you default and after proper legal steps are taken. UCC lien enforcement depends on the contract and the situation.
Does a judgment lien take priority over an existing UCC lien?
Usually, no. Earlier-filed UCC liens typically have priority over later judgment liens covering the same assets.
Can I sell my business if there are UCC or judgment liens against it?
Liens often block or complicate sales. Buyers and lenders usually require liens to be resolved first.
How do I get a UCC lien removed after paying off an MCA?
To remove a UCC lien, the lender must file a UCC-3 Termination Statement with the Secretary of State. This is the only document that officially removes a UCC lien.
You should request:
- Written confirmation the lien will be terminated
- A copy of the filed UCC-3 once submitted
- A timeline for when the filing will occur
Some lenders do this automatically, but many do not. So, you’ll need to be proactive about getting a UCC lien removed.
