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Merchant Cash Advance Default: Legal Strategies for Business Owners

A merchant cash advance can be a lifeline – but what happens if you can’t repay? This situation is daunting: collection calls, threats of litigation, garnished accounts. Don’t panic, you have options. We’ll guide you through

legal strategies

for navigating merchant cash advance defaults.

Understanding Your Merchant Cash Advance Contract

Read the fine print, every word – your rights, and liabilities, are spelled out. Yes, it’s complex jargon-filled legalese. But grasping the terms gives you power:

  • What interest rates and fees could you owe? Contracts can bury sky-high rates.
  • Do you have a personal guarantee attached? If so, your personal assets may be at risk.
  • Is there a confession of judgment clause? Tread very carefully – that lets the MCA company obtain a judgment without you being present in court.

Prioritizing Debt and Negotiating with Your MCA Provider

If defaulting, don’t avoid communicating! Lay out your financial situation transparently. See if the provider will:

  • Defer payments temporarily while you seek new financing
  • Restructure the advance into a new agreement with lower payments
  • Accept a lump-sum payoff for a reduced amount – negotiating down the balance owed

Legal Options If Negotiation Fails

If talks break down, you may need professional legal intervention. A knowledgeable attorney can:

  • Scrutinize your MCA agreement for violations, deceptive clauses, inflated interest, etc.
  • Challenge any attempts to enforce personal guarantees or confessions of judgment
  • If needed, guide you through filing for bankruptcy protection to discharge certain debts

A Strategic Defense Against MCA Litigation

In a worst-case scenario of a default judgment motion, is all hope lost? No. An experienced litigator could:

  • File to vacate the judgment on technical or substantive grounds
  • Assert procedural or contractual defenses to delay or prevent garnishment
  • Negotiate an affordable settlement to resolve the matter
See also  Massachusetts Business Debt Settlement Lawyers

Avoiding Future MCA Troubles

Once resolved, how can you prevent further cash advance problems? Some tips:

  • Strengthen your cash flow management. Poor financial projections often enable avoidable defaults.
  • Seek alternative business financing like revenue-based loans or lines of credit – without onerous repayment terms.
  • Only partner with reputable MCA providers focused on fair dealings and reasonable contracts.

Defaulting on a merchant cash advance is stressful but solvable with savvy legal guidance. You have rights, options to fight back – or renegotiate reasonably. But procrastinating buries you deeper: act swiftly. Consult skilled legal counsel to protect your business, explore all possible remedies.

Delancey Street is here for you

Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

"Super fast, and super courteous, Delancey Street is amazing"
Leo
$500,000 MCA Restructured Over 3 Years
"Thanks for helping me in literally 24 hours"
Jason
$250,000 SBA Loan Offer in Compromise
"Great choice for business owners who need a trustworthy partner"
Mary
$350,000 MCA Restructured Over 2 Years

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