Cleveland MCA Debt Relief Lawyers: 5 Ways to Prepare the File Before Choosing Counsel

If you are running a small business and have payment disputes with merchant cash advance lenders or their attorneys, there are five important things you can do to prepare the file before hiring legal counsel.

• First, collect the court papers and the deadlines.
• Second, assemble the MCA agreements and the guarantees.
• Third, collect your payment history and bank statements.
• Fourth, get any default notices and UCC filings.
• Finally, gather any other MCA agreements and any debt relief contracts.

Then let your lawyer compare the claimed balances with the history of payments. No outcome is guaranteed.

Court Papers

As long as the court papers are active, the response deadline keeps ticking. (I know, it seems unfair.) Settlement talks don’t pause the court’s deadlines. So even when both sides are talking, you need to pay attention to what those papers say and get advice from someone who knows civil procedure. If you got a lawsuit, preserve the papers. Write down how you got those papers and when. And get them reviewed promptly.

Many contracts have cognovit or confession-of-judgment clauses. In Ohio, those clauses are invalid unless they satisfy a special rule: a full statutory warning sits right by the signature, and is in bigger, bolder print than everything else. The state law that barred these “cognovit” clauses from contracts with consumers didn’t cover business financing. In Ohio, you can’t just confess judgment anywhere. Rather, an Ohio confession of judgment must be entered in municipal court where you live or signed, with “notice” (personal service or certified mail). New York State passed a law that was signed and became effective in August, 2019: a confession against an out-of-state borrower is invalid, unless the business holds a place of business in a New York county.

Find the Paperwork

Not all MCA agreements are the same. It’s critical that you find the one official set of forms that was used to close your deal. They can be paper or PDF. Email is unreliable, so is memory. If you have multiple MCA contracts, be sure to collect them all. Bring the original agreement, the addenda, and all guarantees. The wording matters because whether repayment is absolute, as with a loan, usually turns on three factors. A 2020 NY Appellate Division decision specifically weighed an MCA’s “reconciliation” language, a finite term, and its recourse if a merchant goes bankrupt.

The best way to answer MCA claims is with a complete accounting of the advances, fees and deductions. You have to have a clear history of your MCA payments or bank deposits. Your bank statements should show the deductions. A record of sales (credit card payments, for instance) can indicate your cash flow. Keep all those statements. Keep anything else, too, that sheds light on your performance. You want to be sure the paper trail supports you.

You might be tempted to stop paying. It could be a bad idea to stop payments or block ACH withdrawals before a lawyer reviews the contracts and payments. Many MCA agreements count that as default. If you stop payment or block the ACH on your bank account, the company may be able to sue you.

Did the lender send you a notice that it would take legal action? Look for anything in writing that says the MCA company intends to come after you. If you can find it, get a copy of it. You should keep any reconciliation request you sent, and notices the funder sent your customers or your card processor. You may want your lawyer to do a UCC search to make sure that no one has filed any new claims against you. You must get copies of everything. Keep your records in one place.

You need to tell your lawyer about all the lenders you owe, not just the one (or two) who are suing you. For every MCA, write down what you think its status is. Each contract needs its own information. Finally, you need to tell your lawyer about any companies you hired to help you. They may have promised to negotiate with the MCAs, or with their collections lawyers. Whether you used a third-party debt relief program, or a lawyer you found on your own, you should keep those contracts, too. Compare what you paid the program with what was paid to the funders.

You may have settled other MCAs with other funders. If you did, you need to make a full record of it. Get the terms in writing. Any payment confirmations and releases need to be shared, too. Even if you settle an MCA through a payment or a new contract, that settlement doesn’t necessarily settle all your funding problems.

Getting a full set of information helps a lawyer know if he or she is the best fit to help you. Next you should ask yourself who will be negotiating? Next, what happens if you get sued in court? Does that person handle lawsuits and represent you in court, or will you need to hire a separate lawyer? And what fees are included? You want to make sure that the contract sets out clearly what you will get for your money.

In Ohio, a contingent fee must be in writing, and say what percentage the lawyer will get in settlement, or at trial, or on appeal. The agreement has to be signed by both the client and the lawyer. It must also clearly indicate any expenses that the client is responsible for, regardless of outcome. When you have the complete file, you know you’re ready to get advice from a lawyer who has the experience, the judgment, and the time to handle your case.