EMPLOYMENT AGREEMENT


      AGREEMENT made as of the 15th day of July, 1999 by and between DELTA
FINANCIAL CORPORATION, a Delaware corporation (the "Corporation"), and
Randall F. Michaels (the "Executive").

                             W I T N E S S E T H:

      In consideration of the representations, warranties and conditions
contained herein, the parties hereto agree as follows:

            1.    POSITION AND RESPONSIBILITIES

            1.1.  The Executive shall serve in an executive capacity as
Executive Vice President of the Corporation.  The Executive shall perform
such functions and undertake such responsibilities as are customarily
associated with such capacity.  The Executive shall hold such directorships
and executive officerships in the Corporation and any subsidiary to which,
from time to time, he may be elected or appointed during the term of this
Agreement.

            1.2.  The Executive shall devote his full time and best efforts
to the business and affairs of the Corporation and to the promotion of its
interests.

            2.    TERM OF EMPLOYMENT

            2.1   The term of employment shall be five years, commencing with
the date hereof, unless sooner terminated as provided in this Agreement.  The
initial term of employment and any extension thereof is herein referred to as
the "Term."

            2.2.  Notwithstanding the provisions of Section 2.1 hereof, the
Corporation  shall have the right, on written notice to the Executive, to
terminate the Executive's employment for Reasonable Cause, such termination
to be effective as of the date on which notice is given or as of such later
date otherwise specified in the notice.

            2.3.  For purposes of this Agreement, the term "Reasonable Cause"
shall mean any of the following actions by the Executive: (a) failure to
comply with any of the material terms of this Agreement; (b) engagement in
gross misconduct injurious to the Corporation or an affiliate of the
Corporation; (c) knowing and willful neglect or refusal to attend to the
material duties reasonably assigned to him by the Board of Directors or the
President of the Corporation; (d) intentional misappropriation of property of
the Corporation or an affiliate of the Corporation to the Executive's own
use; (e) the commission by the Executive of an act of embezzlement; (f)
Executive's conviction for a felony or if criminal penalties are imposed on
Executive relating to any individual income taxes due and owing by Executive;
or (g) Executive's engaging in any activity which would constitute a material
conflict of interest with the Corporation or an affiliate of the Corporation.

            2.4.  If the Executive's employment with the Corporation shall be
terminated by the Corporation other than pursuant to Sections 2.2, 4.1 or 4.2
hereof, then the Corporation shall pay to the Executive the sum of (a) one
(1) year's salary, less withholding and payroll taxes and (b) twelve times
the average commissions per month earned by the Executive pursuant to the
Commission Agreement (as such term is defined in Section 3.1(a)) over the six
calendar months immediately preceding the date of termination,  less
withholding and payroll taxes.  Any payments made under clause (a) of this
Section 2.4 shall be based upon the Executive's salary as it existed
immediately prior to such termination, and any payments made under either
clause (a) or clause (b) of this Section 2.4 shall be paid in equal
installments over the six months following any such termination; provided,
however that the Executive shall only be entitled to such payments under
either clause (a) or clause (b) of this Section 2.4 as long as he is in
compliance with the provisions of Section 5 below.

            3.    COMPENSATION

            3.1.  (a) The Corporation shall pay or cause Delta Funding
Corporation to pay to the Executive for the services to be rendered by the
Executive hereunder a salary at the rate of $175,000 per annum.  The salary
shall be payable in equal installments in accordance with the Corporation's
normal payroll practices.  Such salary will be reviewed at least annually and
shall be increased (but not decreased) by the Board of Directors of the
Corporation in such amount as determined in its sole discretion.  In addition
to the salary, the Corporation will pay commissions to the Executive pursuant
to a separate commission agreement between the Company and the Executive to be
entered into simultaneously with this Agreement (the "Commission Agreement").
The Commission Agreement may be amended from time to time by the mutual
agreement of the Executive and the Company.

                  (b) In addition, the Company may also pay the Executive an
annual bonus with respect to each fiscal year of the Corporation, either on
an "ad hoc" basis or pursuant to a bonus plan or arrangement as may be
established at the Corporation's discretion for Executive Vice Presidents of
this Corporation.  Nothing herein contained shall, however, obligate the
Corporation to pay any annual bonus to the Executive, it being understood
that any such bonus shall be in the sole discretion of the Board of Directors
and that the amount thereof, if any, may vary depending upon actual
performance of the Corporation and the Executive as determined in the
discretion of the Board.

                  (c) In consideration of entering into this Agreement,
subject to and effective upon the date of the approval by the Corporation's
Board of Directors, the Executive shall be entitled to receive a sign-up
bonus of $100,000 worth of shares of the Corporation's Common Stock, par
value $.01 (the "Common Stock"), based upon the average per share market
value of the Common Stock on the New York Stock Exchange over the last twenty
trading days preceding the date that the Corporation's Board of Directors
approves the grant of such shares of Common Stock to the Executive. The sale
and other voluntary and involuntary disposition of such Common Stock is
prohibited for a period of one year from date of grant.

            3.2.  The Executive shall be entitled to participate in, and
receive benefits from, any insurance, medical, disability, bonus, incentive
compensation (including grants of non- qualified stock options under Delta's
1996 Stock Option Plan, as determined by the Corporation) or other employee
benefit plan, if any are adopted, of the Corporation or any subsidiary which
may be in effect at any time during the course of his employment by the
Corporation and which shall be generally available to the Executive on terms
no less favorable than to other senior executives of the Corporation or its
subsidiaries.

            3.3.  Upon the occurrence of a Change in Control (as defined
herein), all stock options held by the Executive beneficially (in trust or
otherwise) and/or of record, including, without limitation, all stock options
held in trust for the benefit of  the Executive in any Key Employee Share
Option Plan as may be established at the Corporation's discretion, and all
unvested shares of Common stock granted to the Executive pursuant to Section
3.1(c), shall vest and become immediately exercisable on the date of the
Change of Control. For purposes of this Section 3.3, the term "Change of
Control" shall be deemed to have occurred if (i) any "person" (as such term
is used in Section 13 (d) and 14 (d) (2) of the Securities Exchange Act of
1934), becomes the beneficial owner, directly or indirectly, of securities of
the Corporation representing 50% or more of the combined voting power of the
Corporation's then outstanding securities, (ii) during any period of 12
months, individuals who at the beginning of such period constitute the Board
of Directors of the Corporation cease for any reason to constitute a majority
thereof unless the election, or the nomination for the election by the
Corporation's stockholders of each new director was approved by a vote of at
least a majority of the directors then still in office who were directors at
the beginning of the period or (iii) a person (as defined in clause (i)
above) acquires (or, during the 12-month period ending on the date of the
most recent acquisition by such person or group or persons, has acquired) all
or substantially all of the Corporation's assets.

            3.4.  The Corporation agrees to reimburse the Executive for all
reasonable and necessary business expenses incurred by him on behalf of the
Corporation in the course of his duties hereunder upon the presentation by
the Executive of appropriate vouchers therefor.

            3.5.  The Executive will be entitled each year of this Agreement
to a paid vacation of four weeks.

            3.6.  Upon termination of this Agreement for Reasonable
Cause or due to the death or incapacity of the Executive (as defined in
Section 4.1), the Executive shall be entitled to all compensation and
benefits accrued and unpaid up to the date of termination.

            3.7.  The Executive shall not be required to mitigate
damages or the amount of any payment provided to him under this Agreement by
seeking other employment or otherwise.

            3.8.  Nothing contained herein shall prohibit the Board of
Directors of the Corporation, in its sole discretion, from increasing the
compensation payable to the Executive pursuant to this Agreement and/or making
available to the Executive other benefits in addition to those to which the
Executive is entitled hereunder.

            4.    INCAPACITY; DEATH

            4.1   If, during the period of employment hereunder, because
 of illness or other incapacity, the Executive shall fail for a period
of 90 consecutive days, or for shorter periods aggregating more than 90 days
during any twelve month period, to render the services contemplated
hereunder, then the Corporation, at its option, may terminate the term of
employment hereunder, upon not less than 30 days written notice from the
Corporation to the Executive, effective on the 30th day after giving of such
notice; PROVIDED, HOWEVER, that no such termination will be effective if
prior to the 30th day after giving such notice, the Executive's illness or
incapacity shall have terminated and he shall be physically and mentally able
to perform the services required hereunder and shall be performing such
services.

            4.2   In the event of the death of the Executive during the term
hereof, the employment hereunder shall terminate on the date of death of the
Executive.

            4.3.  The Corporation (or its designee) shall have the right to
obtain for its benefit an appropriate life insurance policy on the life of
the Executive, naming the Corporation (or its designee) as the beneficiary.
If requested by the Corporation, the Executive agrees to cooperate with the
Corporation in obtaining such policy.

            4.4.  In the event the employment of Executive is terminated by
the Corporation as the result of the death or incapacity of the Executive,
the Corporation agrees to continue to pay the Executive (or his estate) one
year's salary at his then rate of salary, less withholding and payroll taxes,
plus twelve times the average commissions per month earned by the Executive
pursuant to the Commission Agreement over the six calendar months immediately
preceding the date of termination, less withholding and payroll taxes.  Any
payments made under this Section 4.4 shall be paid in equal installments over
a period of one year after such termination.

             5.   OTHER ACTIVITIES DURING EMPLOYMENT; NON-COMPETITION;
                  SOLICITATION.

            5.1.  The Executive shall not during the term of this Agreement
undertake or engage in other employment, occupation or business enterprise.
Subject to compliance with the provisions of this Agreement, the Executive
may engage in reasonable activities with respect to personal investments of
the Executive.

            5.2   During the Term of this Agreement, and for the Restricted
Period (hereinafter defined), if any,  neither the Executive nor any entity in
which he may be interested as a partner, trustee, director, officer, employee,
shareholder, option holder, lender of money, guarantor or consultant, shall
be engaged directly or indirectly in any business engaged in by the
Corporation in any area where the Corporation, or any subsidiary, conducts
such business at any time during this Agreement; provided however, that the
foregoing shall not be deemed to prevent the Executive from investing in
securities if such class of securities in which the investment is so made is
listed on a national securities exchange or is issued by a company registered
under Section 12(g) of the Securities Exchange Act of 1934, so long as such
investment holdings do not, in the aggregate, constitute more than 5% of the
voting stock of any company's securities.   For purposes of this Section 5.2,
the term "Restricted Period" shall mean : (i) in the event that the
Corporation terminates the Executive's employment with the Corporation
pursuant to Section 4.1 at any time during the Term of this Agreement, or the
Executive terminates his employment with the Corporation for any reason prior
to the forty-eighth (48th) month of the Term of this Agreement, a period of
one year after the Executive leaves the employ of the Corporation,  and (ii)
in the event that the Executive terminates his employment with the
Corporation for any reason during the forty-eighth (48th) though the sixtieth
(60th) month of  the Term of this Agreement, a period equal to the unexpired
portion of the Term as of the date that the Executive leaves the employ of
the Corporation.  The Restricted Period shall not be in effect if the
Executive's employment is terminated pursuant to Section 2.2 or 2.4 hereof.

            5.3.  During his employment with the Corporation, and, in the
event that the Executive terminates his employment with the Corporation for
any reason during the Term of this Agreement, for a period of one year after
Executive leaves the Corporation's employ, the Executive will not at any time
solicit (or assist or encourage the solicitation of) any employee of the
Corporation or any of its subsidiaries or affiliates to work for Executive or
for any business, firm corporation or other entity in which the Executive,
directly or indirectly, in any capacity described in Section 5.2 hereof,
participates or engages (or expects to participate or engage) or has (or
expects to have) a financial interest or management position.  This Section
5.3 shall not be in effect if the Corporation terminates Executive's
employment for any reason.

            5.4.  The Executive shall not at any time during this Agreement
or after the termination hereof directly or indirectly divulge, furnish, use,
publish or make accessible to any person or entity any Confidential
Information (as hereinafter defined).  Any records of Confidential
Information prepared by the Executive or which come into Executive's
possession during this Agreement are and remain the property of the
Corporation and upon termination of Executive's employment all such records
and copies thereof shall be either left with or returned to the Corporation.

            5.5.  The term "Confidential Information" shall mean information
disclosed to the Executive or known, learned, created or observed by him as a
consequence of or through his employment by the Corporation, not generally
known in the relevant trade or industry, about the Corporation's or any of
its subsidiaries' or affiliates' business activities, services and processes,
including but not limited to information concerning advertising, sales
promotion, publicity, sales data, research, finances, accounting, methods,
processes, business plans, broker or correspondent lists and records and
potential broker or correspondent lists and records.

            6.    ASSIGNMENT.  The Corporation shall require any successor or
 assign to all or substantially all the assets of the Corporation (whether by
 merger or by acquisition of stock, assets or otherwise) prior to
 consummation of any transaction therewith, to expressly assume and agree to
 perform in writing this Agreement in the same manner and to the same extent
 that the Corporation would be required to perform it if no such succession
 or assignment had taken place.  This Agreement shall inure to the benefit of
 and be binding upon the Corporation, its successors and assigns, and upon
 the Executive and his heirs, executors, administrators and legal
 representatives.  This Agreement shall not be assignable by the Executive.

            8.    NO THIRD PARTY BENEFICIARIES. This Agreement does not create,
and shall not be construed as creating, any rights enforceable by any person not
a party to this Agreement, except as provided in Section 7 hereof.

            9.    HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.

            10.   INTERPRETATION. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.  If, moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held by a court
of competent jurisdiction to be unenforceable because it is excessively broad as
to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.

            11.   NOTICES. All notices under this Agreement shall be in
writing and shall be deemed to have been given at the time when mailed by
registered or certified mail, addressed to the address below stated party to
which notice is given, or to such changed address as such party may have
fixed by notice:


            To the Corporation:
            Delta Financial Corporation
            1000 Woodbury Road
            Suite 200
            Woodbury, New York 11797
            Attn: President

                  And

            To the Executive:

            Randall F. Michaels
            114 Asharoken Road
            Northport, NY 11768

provided, however, that any notice of change of address shall be effective
only upon receipt.

            12.   WAIVERS. If either party should waive any breach of any
provision of this
Agreement, he or it shall not thereby be deemed to have waived any preceding
or succeeding breach of the same or any other provision of this Agreement.

            13.   COMPLETE AGREEMENT; AMENDMENTS.  The foregoing is the
entire agreement of the parties with respect to the subject matter hereof and
may not be amended, supplemented, canceled or discharged except by written
instrument executed by both parties hereto.

            14.    EQUITABLE REMEDIES.     The Executive acknowledges that he
has been employed for his unique talents and that his leaving the employ of
the Corporation would seriously hamper the business of the Corporation and
that the Corporation will suffer irreparable damage if any provisions of
Section 5 hereof are not performed strictly in accordance with their terms or
are otherwise breached.  The Executive hereby expressly agrees that the
Corporation shall be entitled  to seek injunctive or other equitable relief,
in addition to all other remedies permitted by law, to prevent a breach or
violation by the Executive and to secure enforcement of the provisions of
Section 5.  Resort to such equitable relief, however, shall not constitute a
waiver or any other rights or remedies, which the Corporation may have.

            15.   GOVERNING LAW. This Agreement is to be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of law.

            IN WITNESS WHEREOF, the parties hereto have executed this
            Agreement as the date first above written.


                                          DELTA FINANCIAL CORPORATION

                                          By: /S/ HUGH MILLER
                                              ------------------
                                          Name: Hugh Miller
                                          Title: President and CEO


                                          /S/ RANDALL F. MICHAELS
                                          --------------------------
                                          RANDALL F. MICHAELS