Struggling with debt?

WHAT HAPPENS WHEN YOU DEFAULT ON A MERCHANT CASH ADVANCE?

Default on a Merchant Cash Advance can feel like the end of the road. It can feel like you’re out of options, you’re being threatened by predatory lenders, struggling to stay afloat, and worried about what comes next. At DelanceyStreet.com, we’ve seen countless business owners in this predicament, and we want you to know: We can help you out of this situation.

Defaulting on an MCA happens when you fail to make the daily or weekly repayments on your MCA (Merchant Cash Advance). MCAs are different from traditional loans; they aren’t loans, which is why the penalties, legal consequences, and solutions to default can be confusing.

Below is a comprehensive article on what to expect, potential legal outcomes, and how Delancey Street can defend you every step of the way. Many MCA lenders are quick to pull the trigger on legal consequences when they think you’re about to default on an MCA. They want to secure their money, ASAP.

AS SEEN ON MAJOR MEDIA
We’ve been quoted by major media outlets in the country, and we know what it’s like to handle high-stakes negotiations.

MCA DEFAULT PENALTIES

Regardless of the size of your business.
Regardless of how much you owe.
Regardless of the stage of your delinquency.

Merchant Cash Advance default carries serious repercussions. You need serious legal help.

1. Daily Repayment Acceleration
   If your agreement includes clauses (often hidden in the fine print) which give permission to the MCA provider to accelerate your repayment schedule, you could be asked to repay the entire balance immediately overnight. This can lead to an onslaught of costs, interest, and fees.

2. Increased Interest and Fees
   Many MCA providers add default charges, late fees, or penalty factor rates. Suddenly, the total amount you owe skyrockets immediately. You might feel like you’re pouring money down the drain just trying to keep up. It feels like there’s no end in sight.

3. Collection Actions
   MCA providers often hire aggressive collections agencies—or they use internal collectors who aren’t afraid to call day and night. According to the Consumer Financial Protection Bureau (CFPB.gov), unfair debt collection practices are prohibited, but some MCA companies get around regulations by asserting that they are not offering consumer credit.

4. Confession of Judgment (COJ)
   Many MCA agreements incorporate a COJ, which might allow the lender to get a judgment against you without a trial. This can mean frozen bank accounts, garnished receivables, or worse. If you see a COJ clause in your paperwork, you should consult legal counsel immediately.

5. Potential Legal Action
   MCA providers can sue you in civil court for breach of contract. Penalties for losing a lawsuit might include having a judgment recorded against you, which tarnishes your business credit, personal credit, and can lead to liens on your assets. For more info on legal judgments, visit the U.S. Courts official site (uscourts.gov) for insights into how judgments and federal proceedings function.

LAWS AND REGULATIONS THAT MAY APPLY

While MCAs are not regulated in the same manner as traditional business loans, a few legal frameworks do come into play:

• Uniform Commercial Code (UCC)
  MCA providers will often file a UCC-1 financing statement to secure a claim on your business assets. For more info, visit the Uniform Law Commission (uniformlaws.org), which provides background on the UCC.

• Federal Trade Commission (FTC.gov)
  The FTC is the government body that oversees general trade practices and might step in if unfair or deceptive acts are involved.

• State-Specific Usury Laws
  In some states, if an MCA is deemed to be a disguised loan with a usurious interest rate, a court might invalidate the agreement. This depends heavily on your state’s specific statutory guidelines.

IMPLICATIONS OF DEFAULT IN EVERY SITUATION

Default can unfold differently depending on your MCA’s contractual clauses. Every state is different, and has state specific laws.

1. Personal Guarantee
   Many MCA providers require you to sign a personal guarantee. That means the lender can pursue your personal assets if the business cannot pay. Your personal home, bank accounts, and other valuables might be at risk—especially in states where business protections are weaker. Some states allow COJ’s and this can create issues.

2. Multiple MCA “Stacking”
   We’ve seen business owners who take out one MCA, then another, and another—ultimately defaulting on all. This stacking leads to a vicious debt cycle which can bankrupt your business fast. Some lenders have “Stacking,” clauses which add penalties for stacking.

3. Equipment and Lease Seizures
   If your agreement references specific assets or if a lender has filed a UCC-1 to secure equipment, the MCA provider could claim your business machinery. This is especially serious if you rely on that equipment for daily operations.

4. Bank Levy
   Confessions of Judgment can rapidly turn into bank levies and frozen accounts if the lender acts swiftly. You may wake up one morning and discover you can’t access your business operating funds.

DEFENSE STRATEGIES: HOW WE FIGHT FOR YOU

At Delancey Street, we recognize how dire a default situation can feel. We’ve encountered countless lenders, each with a unique tactic for collecting on an MCA default. Here’s how we defend you:

1. Immediate Communication with the Lender
   Sometimes, lenders appreciate a straightforward approach—especially if they realize you have an expert team behind you. We reach out, show them your financial statements, and present a workable settlement or extended payment plan.

2. Debt Settlement Negotiation
   Our attorneys are skilled in business debt settlement and can reduce your overall balance. We know how factor rates are calculated, and we know how to challenge them. Our results show that we can reduce balances by up to 70%.

3. Legal Challenges to Confession of Judgment
   If a COJ is involved, we analyze whether it was lawfully executed. There are ways to disassemble it, and reduce it’s legal consequences. We look for any possible violations or irregularities. If the COJ was obtained improperly, we’ll fight to vacate it. In some states, a COJ isn’t valid.

4. Consolidation Options
   We help you explore merchant cash advance consolidation or other forms of business financing (like invoice factoring or SBA loans from SBA.gov). These solutions can free up your cash flow so you can make manageable monthly payments.

5. Litigation Defense
   If it goes to court, we protect you. Our legal team can push back on any overreaching claims, hidden fees, or unscrupulous collection tactics.

HOW AN MCA DEFAULT CAN BE DISMANTLED

We get it. Sometimes, you don’t see the default coming until it’s too late. You might be juggling multiple vendor payments, business credit cards, personal obligations, and endless MCA withdrawals. Then, without warning, a payment bounces. The MCA provider threatens legal action. Suddenly, you’re facing a default scenario that can spiral.

But guess what? It can be fixed. You just need legal help. It doesn’t have to be the end of the road – but you need to get legal help.

We can help you question every element of that MCA contract that you signed. We examine the interest structure (or factor rate), check for misleading terms, highlight any potential violations of consumer protection or fair trade principles, and challenge a lender who tries to skirt the law. Then, once we find the cracks, we push for a settlement or loan restructuring that gives you breathing room.

We protect. We guide. We negotiate.

STRATEGIES WE USE TO DEFEND YOU

• Show Lender Willingness
  We highlight how you’ve already paid a substantial portion of the advance. We show that you want to pay more, but you need flexible terms. The lender has understand your revenue has gone down, and there needs to be a give and take.
• Expose Illegitimate Costs
  We examine fees. Administrative fees, origination fees, or random penalty charges might be excessive. We demand clarity. Often lenders stuff punitive junk fees, in order to just make more money.
• Challenge Jurisdiction
  Sometimes, the MCA provider files a lawsuit in a state far from where your business is located. We can question whether the chosen venue is legally valid. If your business is in a state where the COJ doesn’t exist, then it’s not valid.
• Propose a Lump Sum
  If you have partial funds, we propose a reduced lump sum that satisfies the debt. Creditors often accept it because they’d rather get something than nothing.
• Leverage Bankruptcy Threats
  No lender wants you to file bankruptcy, because they fear getting nothing. Using that leverage, we can negotiate a more reasonable plan.

GOVERNMENT AGENCY RESOURCES

For further insights, you can check out:

• Federal Trade Commission – for info on unfair trade practices
• Consumer Financial Protection Bureau – for regulations on fair debt collection
• SBA.gov – for alternative business loans and relief programs

ANYWAY, HERE’S THE BOTTOM LINE

Defaulting on a Merchant Cash Advance is serious—but it’s not the end. DelanceyStreet.com is here to help. We provide a comprehensive defense strategy which addresses every angle: negotiating with lenders, pushing back on COJs, consolidating your debts, and litigating if necessary.

CASE HIGHLIGHTS
Delancey Street saves a business owner over $400,000.
Delancey Street extends payment terms from 6 months to 3 years for a distressed client.

Yes, these results are real.