Should I Hire a Merchant Cash Advance Attorney?

should i hire a merchant cash advance attorney

If you’ve been struggling with debt from a merchant cash advance, you might be wondering: “Should I hire a merchant cash advance attorney?”

Merchant cash advances are becoming an increasingly popular form of business financing. Unlike traditional bank loans, MCAs don’t require good credit or a lengthy application process. In fact, they’re not loans at all. Rather, they’re an advance on a company’s future sales. And they can provide cash to your bank account in as little as 24 hours.

The problem is that since MCAs are not loans, there is little regulation around how providers operate. The fees can be excessive, and payments are made on a weekly or even daily basis. For struggling business owners who may not have reliable cash flow, taking out a merchant cash advance can quickly spiral into a cycle of debt. 

Sound familiar? If you’re currently experiencing legal issues related to MCA debt, you might be wondering if you need to hire a law firm for help. It’s an important decision, especially if you are facing a lawsuit, UCC lien or have a judgment against you. Here’s what you should know about hiring an MCA attorney and if it’s right for you.  

Should I Hire a Merchant Cash Advance Attorney?

When deciding whether to hire an attorney to help you with MCA debt, it’s important to know what types of assistance they can provide compared to other types of services.

MCA Attorney vs. Debt Relief Firm

In your search for help, you’ve probably come across debt relief companies that claim they can renegotiate, settle, or otherwise restructure your business debt for you. Many of these services are legitimate (though there are many scams out there, too). Often they will reach out and solicit you directly for business. Knowing who to trust is always the concern. 

Keep in mind, however, that at the end of the day, these are for-profit businesses. Many have limited experience and resources. So their primary goal is to make money. Debt settlement  companies can charge quite a bit for their services, especially upfront fees. And there’s no guarantee they will resolve your debt problem. You may also be in the dark about the true cost and risk of hiring their services while dealing with an already challenging situation. There’s not much accountability. And in all likelihood, they’re not licensed to handle lawsuits or deal with UCC liens. You might have to continue fielding calls from debt collectors and struggling to keep your business operating while they attempt to negotiate on your behalf. 

In many cases, you’d be better off using those funds to pay down your debt or hiring reputable legal debt help. 

What Does an MCA Attorney Do?

Attorneys, on the other hand, are legally bound to act in your best interest. You are the client, and there is an ethical obligation to communicate clearly be upfront about fees and service terms. Often, your funds are also insured when paying money into the attorney escrow account. THis gives added reassurance that your money for debt resolution is secure. They can advise you on legal details and represent you in and outside of the courtroom. Some of the services that an attorney who focuses on MCA debt can provide:

  • Take over communications with debt collectors
  • Help restructure your merchant cash advance with favorable terms
  • Settle your debt
  • Defend you in a lawsuit
  • Pursue a countersuit or claim against an unscrupulous MCA
  • File for bankruptcy, if necessary
  • Resolve UCC issues

Questions to Ask Before Hiring an MCA Debt Help Law Firm

Now that you have a better understanding of what an MCA attorney does, you can better answer the question: “Should I hire a merchant cash advance attorney?”

Below are a few more questions you can ask yourself to help you decide.

Is your MCA debt impacting your business negatively?

Unlike a business loan from a bank, MCA payments are taken directly out of your receivables. Withdrawals are made from your business bank account daily or weekly. That can make it difficult to manage your existing expenses and maintain positive cash flow. An expensive MCA can compound any financial issues you’re facing, putting you in danger of defaulting. An attorney can help you restructure your MCA so that payments aren’t such a drain on your business. They will ensure the terms of the agreement are more favorable to you, and your rights are protected.

Are you in default?

When you miss your MCA payments, you’re considered to be in default. Defaulting on your MCA payments often constitutes a breach of contract. This can have a number of serious consequences. For one, the debt could be turned over to debt collectors, who will contact you repeatedly and demand payment. Your MCA provider may also file a lawsuit against you or send UCC liens notices to your payors. A reputable MCA debt help lawyer can represent your case and advise you on the best way to handle past due MCA debt, as well as help protect the legal rights of your business (and you).

Is there a UCC lien against your business?

The Uniform Commercial Code (UCC) is a set of laws that govern all commercial transactions in the U.S. If you default on an MCA, the provider can file a UCC lien against you. This is a common practice, and can happen within a matter of days of missing MCA debt payments and breaching your contract. 

A UCC lien can be placed against equipment, inventory, income and other assets. The merchant cash advance company can reach out to your customers and payment processors, and request that they pay the funder directly instead of you. Not only is this an embarrassing situation, but it means you have even less income coming in to pay off your debt (not to mention, cover your bills). It can hurt your business operations and possibly your reputation in your industry.

An MCA attorney can assist with disputing a UCC lien. And if you’ve satisfied your debt, they can ensure it is removed, as legally required.

Did you sign a confession of judgment? 

A common provision in MCA contracts is known as a confession of judgment (COJ). This essentially strips away your right to defend yourself in court if the MCA provider sues you. Instead, a judgment is entered against you without notice. This allows the MCA company to skip court proceedings and begin the process of freezing accounts, possessing assets, etc. 

An attorney can help you deal with a judgment, and potentially have it reversed. It was a common practice for MCA providers to file COJs in the state of New York, where the courts were much more amenable. However, as of 2019, COJs are no longer enforceable for non-New York residents. An attorney will know your legal rights.

Hiring an MCA Attorney: Next Steps

When dealing with MCA debt, hiring a legal professional is usually a good idea. There are few regulations surrounding merchant cash advances, and the contracts often contain confusing jargon. You don’t want to risk the health of your business or your personal finances by trying to deal with MCA debt on your own.
Tayne Law is highly experienced with helping clients resolve their MCA and other types of consumer and business debt. We can review your situation and devise a plan that keeps your business and personal matters intact. If you want to stop dealing with MCA debt and collectors and get back to focusing on your business, give us a call at (866) 890-7337 or fill out our short contact form. We provide a free, no-obligation phone consultation to learn about your options and how we can help. We never sell or share your information ever and will always keep your matter confidential.

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