Best Lawyers to File a Chapter 7 to Discharge MCA Personal Guarantee Liability — 2026

Top Chapter 7 Firms for MCA Personal Guarantee Discharge — 2026

If you're looking for an attorney who can discharge your MCA personal guarantee through Chapter 7, most bankruptcy lawyers won't cut it. You need someone who understands both Chapter 7 procedures and the specific challenges MCA funders raise when opposing discharge. These are the three best firms for 2026. Your search is over.

Why MCA Personal Guarantees Are So Dangerous

Here's what most business owners don't realize until it's too late. Every MCA contract includes a personal guarantee. This is not an optional add-on — MCA funders require it as a standard condition of funding. When you sign the personal guarantee, you agree to be individually liable for the full MCA amount if the business defaults. This means the MCA funder can pursue your personal assets: your home equity, your personal bank accounts, your wages, your car, your retirement savings (in some states), and any other property you own.

The danger is compounded by confessions of judgment (COJs). Most MCA contracts require the borrower and guarantor to sign a COJ — a pre-signed legal document that allows the funder to obtain a court judgment without filing a lawsuit. The funder simply files the COJ with a court clerk, obtains a judgment, and immediately begins enforcing it through bank levies, wage garnishment, and property liens. The guarantor receives no notice, no opportunity to defend, and no hearing.

While New York and several other states have restricted COJs for out-of-state borrowers, many MCA funders still use them aggressively. Even without a COJ, the personal guarantee gives the funder a straightforward breach-of-contract claim against the individual owner — a claim that can result in a judgment, collection, and financial ruin if not addressed.

How Chapter 7 Discharge Works: 11 USC §727

The Chapter 7 discharge under 11 USC §727 is the most powerful debt elimination tool available to individuals. It permanently eliminates virtually all unsecured debts — including MCA personal guarantee liability. Here's how it works:

Filing. You file a Chapter 7 petition with the bankruptcy court, listing all debts (including MCA guarantees), assets, income, and expenses. The filing fee is $338. The automatic stay under §362 takes effect immediately, stopping all collection activity.

341 Meeting. Within 21–40 days, you attend the meeting of creditors (the “341 meeting” under §341). The Chapter 7 trustee and any creditors may ask questions about your finances. MCA funders rarely attend these meetings because they know the guarantee is dischargeable.

Objection Period. Creditors have 60 days after the 341 meeting to file objections to discharge or nondischargeability complaints under §523. If no objection is filed, the debt is discharged.

Discharge Order. Approximately 60–90 days after the 341 meeting, the court enters the discharge order. The discharge injunction under §524 permanently bars all creditors from attempting to collect discharged debts. The MCA personal guarantee is eliminated forever.

The Means Test: Why Business Owners Often Bypass It

The means test under 11 USC §707(b) was created by the 2005 BAPCPA amendments to prevent high-income individuals from filing Chapter 7 when they could afford to pay creditors through a Chapter 13 plan. The means test compares your income to the median income for your state and household size.

But here's the thing most people don't know — the means test contains a critical exemption for business debtors: it applies only when debts are "primarily consumer debts." Under §707(b)(1), if your debts are not primarily consumer debts — meaning more than 50% of your total debt is business-related — the means test does not apply at all. You qualify for Chapter 7 regardless of your income level.

For business owners with MCA personal guarantees, this is almost always the case. MCA guarantees are business debts by definition — they arise from a commercial financing transaction. If your MCA guarantee obligations exceed your consumer debts (mortgage, car loan, credit cards), the means test is irrelevant. An experienced attorney identifies this immediately during the initial consultation and confirms Chapter 7 eligibility.

Exemptions: Protecting Your Assets in Chapter 7

Chapter 7 is a liquidation bankruptcy — but that does not mean you lose everything. This is where most people panic unnecessarily. The exemption system under 11 USC §522 protects specified property from the Chapter 7 trustee. Depending on your state, you may use either federal exemptions or state exemptions (some states allow you to choose).

Federal Exemptions (11 USC §522(d)): Homestead: $27,900 per individual ($55,800 for married couples filing jointly). Motor vehicle: $4,450. Household goods: $14,875 aggregate. Retirement accounts: unlimited (ERISA-qualified plans are fully exempt under §522(b)(3)(C)). Wildcard: $1,475 plus any unused portion of the homestead exemption up to $13,950.

Key State Exemptions: Several states offer significantly more generous exemptions. Texas and Florida provide unlimited homestead exemptions. California offers two alternative exemption schemes. New York provides a $179,975 homestead exemption (varies by county). An experienced Chapter 7 attorney selects the exemption scheme that maximizes asset protection for your specific situation.

Retirement Accounts: 401(k) plans, IRAs (up to approximately $1.5 million), pension plans, and other qualified retirement accounts are fully exempt in Chapter 7. This is one of the most important protections for business owners — your retirement savings are safe from the Chapter 7 trustee and from MCA funders.

Defending Against §523 Nondischargeability Challenges

MCA funders occasionally try to prevent discharge of personal guarantees by filing adversary proceedings under 11 USC §523. Don't let that scare you — these challenges rarely succeed. The two most common ones are:

§523(a)(2)(A) — Fraud or False Pretenses. The funder argues that the debtor obtained the MCA through fraudulent representations. To prevail, the funder must prove: (1) the debtor made a false representation, (2) the debtor knew it was false, (3) the funder justifiably relied on it, and (4) the funder suffered damages. This is a high burden. Routine business optimism in an MCA application (“sales are growing”) does not constitute fraud. The funder must prove intentional deception.

§523(a)(2)(B) — False Financial Statement. The funder argues that the debtor provided a materially false written financial statement. The funder must prove: (1) the statement was in writing, (2) it was materially false, (3) the debtor intended to deceive, (4) the funder reasonably relied on it, and (5) the funder extended credit based on the statement. MCA funders struggle with this challenge because their underwriting typically relies on bank statements (which are bank-generated, not debtor-generated) rather than financial statements prepared by the debtor.

Defense Strategy. An experienced Chapter 7 attorney prepares for these challenges pre-filing by: (1) reviewing all documents the debtor submitted during the MCA application process, (2) identifying any potentially problematic representations, (3) documenting that the debtor acted in good faith, and (4) demonstrating that the MCA funder’s underwriting relied on bank records rather than debtor representations. Most funders do not file §523 challenges because the cost of litigation exceeds the likely recovery.

Coordinating Personal Chapter 7 with Business Debt Resolution

Filing personal Chapter 7 addresses the personal guarantee, but it doesn't resolve the underlying business MCA debt. That's why coordination matters — here's how it works:

Scenario 1: Business Files Subchapter V + Owner Files Chapter 7. The business reorganizes under Subchapter V (11 USC §1181–1195), paying MCA funders through a plan. Simultaneously, the owner files personal Chapter 7 to discharge the personal guarantee. This is the most full solution — the business survives and the owner’s personal liability is eliminated.

Scenario 2: Business Closes + Owner Files Chapter 7. If the business is not viable, the owner closes the business (or the business files its own Chapter 7 for liquidation) and the owner files personal Chapter 7 to discharge all personal guarantee liability. This provides a clean break from all MCA obligations.

Scenario 3: Business Settles + Owner Files Chapter 7. The business negotiates out-of-court settlements with MCA funders (through a firm like Delancey Street), paying reduced amounts. The owner files personal Chapter 7 to discharge any remaining personal guarantee exposure. This can be the most cost-effective approach when the business has some ability to pay but the personal guarantee exposure exceeds what the owner can cover.

The timing of these coordinated filings is critical. An experienced attorney sequences the filings to maximize protections and avoid procedural complications. Filing both simultaneously is sometimes advantageous; other times, filing sequentially provides better results. The strategy depends on the specific MCA contracts, the business’s financial condition, and the owner’s personal asset situation.

Confessions of Judgment and the Chapter 7 Discharge

If an MCA funder has already filed a confession of judgment against you personally, Chapter 7 provides a clear path to eliminating that judgment. The COJ is based on the personal guarantee — and when the guarantee is discharged, the underlying debt obligation is eliminated. The judgment becomes unenforceable.

After receiving your Chapter 7 discharge, your attorney files a motion in the state court where the COJ was entered to vacate the judgment. The basis for vacatur is the discharge injunction under 11 USC §524, which permanently bars any act to collect a discharged debt. Most state courts grant these motions routinely once presented with the bankruptcy discharge order.

If the funder has already begun enforcement through bank levies or wage garnishment, the automatic stay stops all enforcement immediately upon filing. Any funds seized post-petition must be returned. Funds seized pre-petition may be recoverable depending on timing and applicable exemptions.

Top Chapter 7 Firms for MCA Personal Guarantee Discharge — 2026

Here are the three firms we recommend for business owners seeking Chapter 7 discharge of MCA personal guarantees in 2026. Your search is over.