Missouri MCA Debt Relief Lawyers: 5 Checks Before a Counteroffer

If you’re a Missouri business owner behind on a merchant cash advance, don’t counteroffer without first checking these five things.

• First, whether any court deadline has passed.
• Second, whether your file is complete and what it balances out to.
• Third, what Missouri law does and does not offer you in your situation.
• Fourth, who negotiates and for what fee.
• And finally, the real meaning of the settlement terms.

Anytime the court has deadlines, you have real pressure. Deadlines must be met. If there’s a lawsuit in the picture, start with the summons. If you’re ever handed a court summons or otherwise served with a legal notice, do not pitch it. First, make sure you can later prove that you received it, and how and when. Remember too that talking with the funder or a settlement company does not extend the answer deadline.

Beware when debt programs tell you to “stop making payments” or to set up an ACH block. Many merchant cash advance agreements call this default. Defaulting on a merchant cash advance can allow the funder to demand the full balance, add fees, contact your customers, and go after your guarantors, or even sue you. Putting a stop to payments doesn’t necessarily bring a settlement offer or make a lawsuit go away. So make sure a lawyer looks over the agreements and your cash flow.

If there’s a confession of judgment, then look at what jurisdiction is listed on it. New York as of August 30, 2019 forbids a confession of judgment against a non-resident. On the other hand, any place of business in New York counts as a resident.

Make sure your file is complete. And don’t rely on settlement people to tell you what’s there or isn’t. Take a look for yourself. When you go to a lawyer for help settling, the lawyer needs to see the MCA agreement, the guarantees, how much you were funded and the repayment amount. Hand over every withdrawal and all your bank statements too. Bring any default notices and your UCC records. Of course, any court papers also go to your lawyer. Don’t forget that each funder settles separately.

You want to find out what balance they’re saying you owe. As you get their balance, check that they have your payment history. Whatever the funder or any party claims your balance is at, this paperwork is your proof. Keep in mind that just because the funder offers you a lower periodic payment, it does not necessarily mean you will end up paying a lower total. If your revenue is lower, some merchant cash advance agreements include reconciliation provisions. Check the documents and do the math.

Missouri Law

It’s common to wonder if some lender just charged you too much in fees. Generally speaking, Missouri law caps the interest rate, but has exemptions. One exemption is found at Revised Statutes of Missouri 408.035, allowing agreements in writing for a higher interest rate and fees on business-purpose credit and loans to corporations or LLCs. So the usual Missouri interest cap typically won’t apply.

Section 427.300 RSMo says the person or entity you’re borrowing from must give you written disclosures, at or before closing, including the ”Total Dollar Cost of Financing.” Note that the law does not apply to lending in deals worth more than $500,000. But that law is little leverage for you. Only the attorney general can enforce it. There can be a $500 penalty for each violation. But it’s not enough to void the contract, and Missouri has no private lawsuit for violating it either. Also, if you signed anything on a business deal in Missouri, get that paperwork out, because the statute of limitations is usually five years.

Who Does the Negotiating

Law firms and debt settlement companies both may negotiate with merchant cash advance companies. But, before you enroll, ask who does the negotiating, who will represent you if you’re sued, and what your fees cover. Signing up to settle with a funder does not mean that any lawsuit against you will disappear. Make sure that whatever you’re hiring for, that’s what you’re paying for. If a lawyer takes your Missouri case on contingency, Missouri Rule 4-1.5(c) says the fee agreement must be in writing, and signed by you. The agreement should say what the percentage is, and how expenses are handled.

If you enrolled in a program for business debt relief, but something stalled, go back to the contract. Do the math on what you paid them versus what they sent to each funder. Make a list of each MCA account and whether it’s settled, in negotiation, in default or in litigation. Remember to keep written proof of any settlements you do manage to complete.

The Settlement Agreement

Don’t skip the fine print when you’re settling a merchant cash advance. Make sure that you’re signing a real release and that you’re actually being dropped from the lawsuit, if there is one. Also remember that signing on the dotted line for any agreement means that you are bound by the written terms, despite what anybody promised you.

Worried about the automatic deductions hitting your account? When negotiating a settlement, make sure you’re clear on whether the debits stop altogether or switch to settlement payments. Confirm in writing who is authorized to make the change. If you have an agreement, make sure you know what happens with a missed payment. Look at the writing for any provision giving them the right to go back and demand the entire balance.

Also make sure the settlement agreement makes clear whether your UCCs will get terminated and when. Customer notices may have to be handled separately. Make sure the agreement says who’s withdrawing them and by when. Ask a tax professional whether you’ll owe taxes. A funder can file IRS Form 1099-C, showing that debt was canceled. Canceled debt is generally taxable. Insolvency can be a workaround, but you’ll need Form 982.

Whether negotiating on your own or with help, don’t count on any standard settlement percentage. Get the deal in writing. And don’t assume that signing is the end. Check your release or judgment for any requirements it has after your final payment. Hang on to the agreement, proof of every payment, and confirmation that each and every step the agreement called for actually got done.

Remember, running the five checks ahead of time is always better than afterward. Check the facts before you’ve missed a payment. And make sure you know the rules before the court date. Regardless of when you take charge, this is an opportunity to sit down with a knowledgeable expert, review your paperwork, and assess your options. Talk with an attorney to find out if you do have leverage and what is possible for you, and remember that a good result is never guaranteed.