Phoenix, Arizona MCA Defense Lawyers
Businesses in Phoenix often get merchant cash advances for working capital. Eventually, the payments become unmanageable, and owners realize they’re in trouble.
Are you struggling to keep up with your existing business debt? Do you have several maxed out credit cards, merchant cash advances, etc? DelanceyStreet Debt Relief can help you figure out the right approach. We focus on all types of unsecured debt, including MCAs, and we tailor our strategy so you can avoid going out of business.
Understanding the MCA Problem
One scenario: you signed multiple MCAs, hoping to boost growth or perhaps they needed a life line. Each advance took daily or weekly deductions from your bank account. Over time, these deductions added up, and now you’re behind on payments. In some cases, MCA lenders threaten to use a Confession of Judgment (COJ). Arizona courts might not enforce a COJ the same way other states do—but this doesn’t mean you’re free from lawsuits under Arizona Revised Statutes Title 12. If you don’t address the debt, you could end up in a situation which could result in huge financial issues for you business wise, and personally—like a default judgment or garnished assets.
Another scenario: the MCA has terms that look like a purchase of receivables on paper, but the rate feels more like a high-interest loan. Some business owners wonder if it’s usurious. Arizona’s usury laws might not apply if the MCA is structured as a true receivables purchase. Even so, experienced MCA defense lawyers can sometimes argue the agreement is actually a disguised loan. If they succeed, you might have leverage to reduce what you owe.
Key Defense Strategies
Sometimes, a lump-sum settlement is possible. Other times, you can push for a longer repayment schedule. Either way, you need to show the MCA provider that you can’t handle your current payments without going out of business. Lenders want to get paid, and a business that’s forced to close can’t pay anything at all. By proving your financial distress with data—like bank statements or P&L statements—you can often negotiate a plan that keeps you operating.
You can also consider consolidation. If you qualify for a term loan, line of credit, or invoice factoring, you might roll multiple MCAs into one new payment. Consolidation makes sense if you can get a lower effective rate. On the other hand, you might need to pay off the MCA balances upfront, which could require a sizable lump sum. If you’re already at the point where the monthly payments can quickly drown you in debt, you’ll need a strategy for that.
Below is a quick reference of potential MCA defense options:
| Strategy | Potential Outcome | Risk/Consideration |
|---|---|---|
| Negotiate a Lump-Sum Settlement | Possible reduction in overall balance | Forgiven debt may trigger a 1099-C (tax liability) |
| Push for Longer Repayment Schedule | Lower periodic payments, improve cash flow | May owe more interest over time |
| Consolidate (Term Loan, Line of Credit) | Single payment, potentially lower rate | Need to qualify, might require a large payoff for old MCAs |
| Bankruptcy (Chapter 7 or 11) | Automatic stay, possibly discharge or restructure | Personal guarantees can complicate matters |
| Self-Negotiation vs. Debt Relief Company | Avoid third-party fees, direct lender contact | Might miss legal defenses or negotiating expertise |
Considering Bankruptcy
In extreme cases, a business owner might consider Chapter 11 or Chapter 7. Chapter 11 can help you reorganize, while Chapter 7 might mean closing the business if it’s no longer viable.
But if you have a COJ – confession of judgement – it might be likely the lender will use the COJ – which could result in huge financial issues for you business wise, and personally. If you signed a personal guarantee, the MCA provider might go after your personal assets. That’s why it’s important to analyze every agreement before deciding on bankruptcy.
Tax Implications
When you settle MCA debt for less than you owe, the forgiven balance might be considered taxable income. The lender can send you a 1099-C. That means the IRS might see the forgiven debt as income. If you’re insolvent, you might reduce or eliminate that new tax burden, but it’s complicated. We always recommend speaking to a tax professional to clarify how this applies to you.
How DelanceyStreet Debt Relief Helps
Delancey Street firmly believes that open communication is one of the main reasons creditors are often willing to listen to you. That’s why DelanceyStreet Debt Relief reaches out immediately, explains your financial challenges, and provides supporting data like up-to-date balance sheets and cash flow statements. By showing the lender you’re serious about repayment, we can negotiate for reduced principal, lower interest rates, or longer payment terms.
DelanceyStreet is owned by an attorney, which means we have a sister law firm that can step in if things escalate.
We save you the time of dealing with creditor calls, and paperwork, so you can focus on running the business. Our goal is to get you relief, keep you operational, and prevent lawsuits. We understand that every situation is different. By using your up-to-date balance sheets, your cash flow statements, and P/L statements, we are able to use data to get you the best possible outcome.