MCA Attorney: 7 Tasks a Lawyer Handles That a Settlement Company Cannot

Many Ways an MCA Attorney Can Help You

A merchant cash advance (MCA) settlement company cannot represent you and defend your business. Only an MCA attorney can do that for you. A settlement company can only negotiate a deal with a creditor on your behalf. They don’t work on any legalities. A law firm does. There are many ways an MCA attorney can help you. They can defend your company against lawsuits and judgments, protect your company in an arbitration process, and argue against a confession of judgment.

MCA lawsuits happen rapidly, often giving you and your company a minimal amount of time to plan. In state court, you have 20 days to appear in New York if you were served in person, and 30 days if served in any other way. If you don’t file an answer, you are at risk of a default judgment against your company. This would allow the creditor to seize assets to fulfill the judgment. A merchant cash advance lawyer can take care of this for you. By drafting and filing an answer on your company’s behalf, a lawyer can protect you from this judgment. A settlement company CANNOT file your answer, which is your legal defense to the case. In federal court, a corporation can almost always appear only through a licensed attorney, not a settlement company or its owner. Because of these tight deadlines and strict requirements, it is best to have an attorney represent your company.

With a confession of judgment, the lender does not even need to appear in court to obtain a judgment. Having a lawyer can help you defend against a confession of judgment. A settlement company cannot do this because they are not lawyers. Since 2019, a New York statute bars creditors from filing confession of judgments against out-of-state businesses. In Texas, any covered confession of judgment is void. When a confession of judgment is still enforceable, an MCA lawyer will often check for compliance with all relevant statutes, such as a properly executed affidavit and a correct amount claimed. Procedural errors can often be the fastest way to vacate a confession of judgment.

A funder does not get to decide to grab your bank account on its own. In New York, a creditor generally cannot seize your bank account until after it obtains a judgment against you. A restraining notice freezes your account, and it takes a levy to seize the money. If you can’t access your account, then you may be unable to pay your business expenses or even payroll. An MCA attorney can help you to un-freeze your bank account when creditors send a restraining notice to banks to freeze accounts related to your business. A settlement company cannot do this on your behalf. The restraint of your bank account is a legal process. A lawyer can file an application to request the judge “exempt” certain funds from your account or to vacate the restraining order. Taking immediate action is crucial.

A lawsuit is not the only way a MCA lender will take action against your business. Many MCA contracts include an arbitration clause. An arbitration requires a formal process of responding to the arbitration demand. Here, an MCA lawyer can handle all the paperwork and filing requirements in the arbitration. They can also argue your case, meet the deadlines, and help collect evidence and other resources needed to defend you in the arbitration process. A settlement company cannot represent you in arbitration or file anything there on your behalf. If your arbitrator hands down an unfavorable ruling, then your MCA funder can ask a court to confirm the award as a judgment against you. In New York, there is generally a 90-day period for a business to file a request with the court to vacate an arbitration award.

Many MCAs claim to fall outside of the law by labeling themselves as purchases of your future receivables. If you are in a New York court, then your lawyer may argue to the judge that the advance is really a loan. New York courts look at whether there was a real reconciliation of purchases and remittances, a defined term of repayment, and whether the funder would have recourse to recover any money in the event that the business failed. An interest rate exceeding 25% annually is considered criminal usury in New York. New York’s highest court ruled in 2021 that a criminally usurious loan is void from its inception. The trouble is, that is not every MCA. A merchant cash advance settlement company cannot file legal briefs on this issue.

Many MCAs require the owner of the business to sign a personal guaranty for the debt. With a personal guaranty, your personal assets may be exposed to seizure. A personal guaranty for an MCA is not a blank check for repayment. You may be able to challenge the validity or scope of the guaranty, show that the funder or broker misled you into the guaranty, or negotiate a limit on what you must pay if called upon to cover the debt. The defenses all depend on the wording of the guaranty. An MCA lawyer can argue the merits of a claim against the personal guaranty in court. A settlement company cannot do this for you.

A bankruptcy petition stops the majority of collection attempts because it brings the automatic stay into effect. For a business who is the debtor, the business entity gets the automatic stay, but not necessarily the business owner as an individual. Your MCA attorney can not only represent your company in a lawsuit, but also advise you about bankruptcy. Weighing the pros and cons of each option is necessary.

Whatever option you choose, one of the worst things you can do as a merchant cash advance lawsuit defendant is to move assets out of a bank when a lawsuit starts. Blocking payments should be the last resort, not the first response. Say the debits were unauthorized when they weren’t and you could blow the credibility you started with. The consequences may be much worse than the original problem.

Legal Advice

You need to analyze the contract you signed and every important correspondence from the lender or broker. By reading every line of your MCA contract and every proposed settlement, an MCA lawyer can give you the facts about what all this means for you. Because you only have a very short time to respond to an MCA lawsuit in New York, your business should contact an MCA attorney as soon as you receive court paperwork. If you want to negotiate a deal with the funder and see how a settlement company can help you, then contact them. If you know you need a lawyer, because you want to retain a professional to represent your company, draft answers and counterclaims for you, and determine if your personal assets are at risk, then contact an MCA lawyer for legal advice.