MCA Defense Lawyers Business Debt Settlement

Businesses can accumulate substantial debts for a variety of reasons – economic downturns, cash flow issues, expansion costs, and more. When debts become unmanageable, business owners may turn to merchant cash advance (MCA) companies for quick financing without realizing the extremely high interest rates and aggressive collection tactics utilized by some MCA lenders. If your business is facing legal action from an MCA company, specialized legal defense can help protect your assets.

How MCA Loans Work

Merchant cash advances provide businesses with lump sum payments in exchange for a percentage of future sales over a set period of time. This type of financing appeals to business owners in need of fast cash because:

• There is no lengthy credit check – MCAs base approval on a business’s payment processing volume. Higher volume means larger advances.
• Funds can be accessed in as little as 24-48 hours – much faster than traditional bank loans.
• Payments fluctuate based on sales volume – businesses pay back more when sales increase.

However, MCA loans often come with interest rates ranging from 60% to as high as 400% APR when all fees are included. And if a business cannot maintain sales volume to meet the repayment schedule, extremely high penalties kick in. Lawsuits soon follow in many cases.

Aggressive Collection Tactics

The MCA industry remains largely unregulated, allowing some lenders to utilize aggressive tactics to collect debts. Common practices include:

• Imposing extremely high penalties for late or missed payments. It’s not unusual for total repayment amounts to double or triple the original advance.
• Freezing business bank accounts and seizing funds without warning.
• Filing lawsuits quickly at the first sign of trouble making payments, rather than working with the business owner.
• Threatening owners with criminal charges for fraud if they fall behind on payments or try to close affected accounts.
• Reporting business owners to credit agencies and compromising their personal credit scores.

These collection methods can rapidly spiral financially distressed business owners into bankruptcy.

Defending Against MCA Lawsuits

If you receive notice that an MCA company has filed a lawsuit for repayment of debts, specialized legal counsel can analyze the case details to build a defense protecting both your business assets and personal finances. Common counterclaims include:

Unconscionable Interest Rates

Though MCA contracts fall outside typical usury laws governing maximum interest rates, their extremely high rates may still be considered unlawful penalties under certain conditions. Your attorney can argue the unfair and deceptive nature of the rates.

Breach of Covenant of Good Faith

Lenders cannot freeze accounts and seize funds without reasonable notice and demonstrated good faith effort to address late payments with borrowers. Your lawyer can claim breach of covenant if the MCA company failed to provide warning or work with you on a repayment plan once initial troubles arose.

Fraud

If an MCA sales representative made false statements regarding repayment terms, interest rates, or other contract stipulations in order to secure your business, those actions may constitute fraud.In addition to building a counterclaim challenging the legitimacy of the MCA contract itself, your lawyer can also request:

• Injunctive relief protecting your accounts and assets from seizure until the lawsuit concludes.
• Additional time to respond to the initial complaint.
• Discovery orders compelling the MCA company to provide documentation supporting their claims and reveal internal policies and procedures.

Having an experienced attorney well-versed in MCA collection practices is crucial for mounting the strongest possible defense.

Outcomes and Settlements

There are several potential outcomes to legal disputes with MCA lenders:

• Case dismissal if your lawyer succeeds in proving unlawful loan terms or collection activities. This releases your business from repayment obligations.
• Favorable settlement if you negotiate a reduced payoff amount and the MCA company agrees to remove derogatory credit reporting.
• Payment plan giving you affordable installments over an extended period without additional fees or penalties.
• Chapter 7 or Chapter 11 bankruptcy if debts are truly unserviceable. This protects your business assets and gives you a fresh start.

Even if the court case concludes without a ruling in your favor, your attorney can often negotiate settlements or payment plans that minimize further damage. The right legal strategy makes all the difference.

Choosing the Right Business Debt Lawyer

Not all attorneys have in-depth experience fighting MCA companies in court. When selecting counsel, look for the following:

• Extensive knowledge of MCA contracts and industry standards. They should be familiar with common clauses and tactics.
• A track record of positive case outcomes for clients sued by MCA lenders. Ask for case examples and client testimonials.
• Willingness to fight aggressively with counterclaims rather than advising immediate settlement.
• Flexible fee structures that ease the financial burden, such as contingency fees based on settlement/judgement amounts.
• Personalized attention and communication throughout the legal process. You need an advisor, not just a lawyer.

The ideal attorney combines litigation skills with compassion for the stress business owners face when dealing with aggressive collections. They can provide both strategic legal defense and emotional reassurance as your case progresses.

Overcoming MCA Debt With Support

Facing legal action from an MCA lender can be an incredibly challenging and emotional situation, especially on top of existing financial struggles. As a business owner, you need strong guidance and empathy to navigate the complex legal landscape. An experienced MCA defense lawyer understands the intimidation tactics often leveraged against borrowers and can offer knowledgeable advice tailored to your unique situation. With the right support, you can resolve debts, salvage credit standing, and protect your livelihood.

Frequently Asked Questions

How soon after receiving a complaint from an MCA lender should I retain a lawyer?

You should contact an attorney immediately upon receiving notice of a lawsuit. Quick action is essential for responding within deadlines and preventing asset seizures or account freezes in the interim. Don’t let intimidation or tight timelines pressure you into handling things alone.

What information should I gather to help my lawyer build the strongest defense?

Compile copies of your MCA contract, loan statements, payment history records, written communication with the lender, and bank statements. Also track dates/times the lender contacted you, any verbal threats or misleading claims made, and when accounts were frozen or funds withdrawn without notice.

Are MCA business debts also considered personal liabilities?

Unfortunately yes, unless your business structure specifically limits liability, such as an LLC or corporation. Expect personal assets like savings accounts, retirement funds, and even your home to be targeted in an MCA lawsuit. An experienced lawyer’s top priority is shielding both your business and personal finances.

How likely is it that legal fees will surpass any savings from reduced settlements or payment plans?

Every situation differs based on the lender, claimed amounts, lawyer rates, and length of the dispute. However, most attorneys offer flexible payment arrangements to ease this concern, such as contingency fees, flat rates, or monthly installments. Fees should never deter you from pursuing a strong defense.