Struggling with debt?

UNDERSTANDING THE MCA DEFAULT PROCESS: FROM MISSED PAYMENT TO JUDGMENT

Delancey Street offers a MONEY BACK GUARANTEE on debt relief services

Regardless of where you are in your journey. Regardless of the amount you owe. Regardless of the stage of your default. We can help you.

Anyway, look, here’s the bottom line: Merchant Cash Advances, commonly known as MCAs, are very tricky and difficult. One missed payment can trigger a series of legal consequences which might result in a lawsuit or judgment against you. Our mission at DelanceyStreet.com—a TOP TIER business debt relief company—is to guide you through the MCA default process, and give you strategies to protect your business and do everything possible legally to protect your business, your employees, and your family.

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We’re proud to say we have a proven track record of saving businesses nationwide. We handle all forms of business debt, from Merchant Cash Advances to credit cards, and beyond. We also provide a MONEY BACK GUARANTEE on our services, which sets us apart – if we don’t get you an outcome, you can get a refund.

What Happens When You Miss a Payment

Missing a payment on your MCA is a step towards a default. Typically, the MCA lender will first notify you that you’re behind and demand immediate payment of the entire MCA, and the factor. If you don’t fix missing the payments, or arrange a new repayment plan, you risk a number of legal and financial issues:

1. Default Notices
   Lenders often send you official notices stating you’re in default. This could be the first indicator of trouble.

2. Increased Fees
   Late or default charges can add up quickly, compounding your overall debt. It can be a big financial hole.

3. Acceleration of Debt
   Some MCA contracts (found in the fine print) allow the MCA lender to demand the entire balance once you miss a payment. There is an acceleration clause in their agreements, which makes it impossible to really pay it all at once. If you fail, they then add additional fees.

4. Aggressive Collections
   Daily calls, letters, even personal visits could become standard. Visit ftc.gov to learn more about fair debt collection rules.

Guess what? If you don’t respond or work with a top-tier team like DelanceyStreet.com, the lender might move to obtain a judgment against you. They have many ways of doing this.

Confession of Judgment (COJ)

A COJ is a legal tool many MCA providers use. If you signed one, the lender can submit it to the court the minute you default. That means:

1. No Trial
   A COJ can skip the normal court process, causing a near-instant judgment.

2. Freezing Bank Accounts
   With a COJ in hand, an MCA lender can freeze your business (and in some cases, personal) accounts almost immediately – with no warning. It can happen overnight.

3. Personal Liability
   If you personally guaranteed the MCA, your personal assets could be at risk. This is something many people don’t like acknowledging, but it’s a real risk.

Laws regarding Confessions of Judgment vary by state. For instance, New York recently restricted COJs for out-of-state borrowers. You can verify these updates by visiting the New York State Unified Court System or consumerfinance.gov for broader consumer protections.

Legal Implications: From Lawsuits to Judgments

Once a default occurs and you stop paying your MCA, the MCA lender can initiate a lawsuit. This leads to potential judgments, which can result in:

1. Wage Garnishment
   While MCAs are not typically “personal loans,” if there’s a personal guarantee, your wages could be garnished and your personala assets can be seized almost overnight.

2. Lien Placement
   A judgment can result in liens against your real property or business assets.

3. Asset Seizures
   Creditors might seize business equipment or other assets to satisfy the judgment.

Each state has different regulations. For instance, the U.S. Small Business Administration (SBA) at sba.gov outlines certain rules for small businesses facing financial distress. Meanwhile, the Federal Trade Commission (FTC) at ftc.gov covers general debt collection guidelines. It’s crucial to know which state or federal laws apply to your case.

Potential Penalties Under the Law

1. Extended Late Fees and Interest
   MCAs often use factor rates, not typical APRs, which can inflate dramatically if you’re behind. If you miss payments, when they lend you money in the future it’ll be at a higher factor rate.

2. Court Costs and Attorney Fees
   If the lender takes you to court, you could be responsible for their legal fees, depending on the terms of your MCA agreement. They will try to hit you with a lot of punitive fees to make it hurt, and to make more money off you.

3. Reporting to Credit Bureaus
   Defaults may be reported to commercial (and sometimes personal) credit bureaus, damaging future borrowing capabilities. If you personally guaranteed the MCA, your personal credit can be hurt.

4. Tax Consequences
   Forgiven or settled debt might be considered taxable income by the IRS (irs.gov)—something you shouldn’t ignore. We can advise you on the consequences at the time of the debt settlement.

Defense Strategies: How We Help You Fight Back

DelanceyStreet.com uses a range of strategies to defend business owners:

1. Scrutinizing the MCA Agreement
   We look for hidden terms or illegal clauses, including questionable COJ clauses. If the MCA contract violates state or federal regulations, it could be invalid, and this could help you get out of debt, or help you get leverage.

2. Negotiating Reduced Balances
   Our team of business debt attorneys can negotiate with the MCA provider for a lower overall balance or better repayment terms.  This is something that can help you avoid a serious disaster, financially.

3. Challenging Unfair Practices
   MCA providers must abide by fair debt collection laws. If they violate these, we’ll use it as leverage to get you relief. If they show up at your place of business to collect the debt, we can use this in the court of law.

4. Filing Motions to Vacate Judgments
   If there’s already a judgment against you—especially if a COJ was used improperly—our attorneys might be able to get it vacated or reduced.

Our Stream-of-Consciousness Approach to Dismantling a Lawsuit

Sometimes, the only way to handle an MCA default is to dismantle the case from the inside out. Here’s how we might do it:

We question everything. We look into how the MCA was structured, why it was labeled as a “purchase of receivables” rather than a loan, and who signed the contracts. Then we check for scary terms, potential usury (depending on your jurisdiction’s definition), and whether the lender complied with local laws when they sent you the agreement. We also gather bank statements, credit card records, everything. We talk to you about each payment you made and each phone call you received. We get a payment log from the lender, and make sure it aligns with your payment history. By the time we’re done, the entire foundation of the lawsuit might crumble, because we’ve identified every hole, every oversight, and every questionable tactic used by the MCA provider.

What Should You Do Now?

1. Contact DelanceyStreet.com
   We offer a FREE consultation and a MONEY BACK GUARANTEE for our debt relief services. Regardless of your situation, we’re here to guide you. Once you reach out to us, we’ll help analyze your situation, tell you what’s going on legally, and give you an exposure analysis on your MCA debt.

2. Gather Documentation
   Invoices, emails, bank records, MCA agreements—have them ready for us to review. We will use all the documents to help you understand what happens next.

3. Assess Your Financials
   Check your current debt obligations, including any other loans or advances, to see how bad your situation is. We will advise you on what the right way out of this, is.

4. Explore Possible Solutions
   You might want to consider debt restructuring, consolidation loans, or direct negotiation with your lender. There are many ways out, like an SBA loan, for example.