MCA Lawsuit Debt Defense

If you’ve defaulted on your MCA agreement, the funder may file a lawsuit to recover the remaining balance. This is often due to missed payments, insufficient funds in your bank account, or an attempt to close your account to prevent withdrawals.

It depends on your contract. If you signed a personal guarantee, the funder can sue you personally, putting your personal assets at risk. Otherwise, they can only sue your business unless they claim fraud or misrepresentation.

The funder can file a lawsuit seeking a judgment against you. If successful, they may be able to:

• Freeze your bank accounts
• Place liens on business or personal assets
• Obtain a court order for repayment
• Garnish your wages in most states (if a personal guarantee applies)

It depends on the contract signed. Most merchant cash advance (MCA) contracts state a choice of venue (Venue Clause) in their contracts. We find most MCA companies choose New York, New Jersey, Connecticut, or Utah as their choice of venue. So if you live in Texas, they will still file a lawsuit in New York if that was in the contract.

It depends on the legal structure of your business and the complexity of the case.

• If you are a sole proprietor, you can represent yourself in court because there is no legal distinction between you and your business. However, it is still advisable to consult an attorney since MCA lawsuits can be complex and involve significant financial risks.
• If your business is an LLC or corporation, most courts require a licensed attorney to represent the business in a lawsuit. This is because corporations and LLCs are considered separate legal entities from their owners, and courts typically do not allow non-lawyers to represent a business in court.
• If the lawsuit includes a personal guarantee, meaning you personally guaranteed the MCA, you may need legal representation for both your business and yourself.

You should respond to the lawsuit by filing an answer with the court before the deadline (typically 20-30 days). Failing to respond could result in a default judgment against you. Consulting a lawyer experienced in MCA cases is highly recommended.

Yes, many MCA funders are open to settlement discussions to avoid a prolonged legal battle. You may be able to negotiate a lump-sum payment, reduced balance, or extended repayment terms. A MCA debt settlement attorney can help facilitate negotiations.

• Do not ignore it – this can result in an automatic judgment against you.
• Consult an attorney who specializes in MCA lawsuits.
• Gather evidence related to your agreement and payments.
• Consider negotiating a settlement before the case goes to court.

If the court rules in favor of the MCA funder, they may be able to:

• Enforce bank account levies
• Seize business assets
• Garnish wages (if a personal guarantee exists)
• File liens on property