Struggling with merchant cash advances (MCA) in Dallas, Texas, can be toxic, and it’s impossible to keep up. Often, it starts with a single cash advance intended to help you grow—one merchant cash advance can lead to another. Pretty soon your cash flow is crushed, and you can’t keep up with everything else. At DelanceyStreet Debt Relief, we’ve seen how daily or weekly MCA deductions can undermine your cash flow, trigger default notices, and it’s impossible to keep up.
Below, we’ll provide critical legal concepts, potential defense strategies, and the overall debt landscape in Dallas. Ultimately, every lender wants to get paid back, and no lender wants you to file bankruptcy.
Understanding the Dallas Business Debt Landscape
Many local businesses rely on merchant cash advances because they were hoping to grow. That’s fine until multiple MCA balances stack on each other and you can’t keep up with the withdrawals. You might miss a payment or two, then realize your business debt is overwhelming you, and you’ve received a breach-of-contract notice.
Some MCA contracts also include Confessions of Judgment (COJs), which can be potentially complicated in Texas. While Texas generally disallows COJs, an out-of-state creditor can file suit in a different jurisdiction and then attempt to domesticate that judgment in Dallas courts.
If personal guarantees exist, your personal assets can be at stake. Under Texas law, your homestead is usually protected (Tex. Const. art. XVI, § 50), but your other assets may not be. It’s why communication with creditors is so critical. When you explain your business’s financial position, sometimes they’re willing to adjust terms or even reduce the principal—particularly if they see that continuing to add defaults and fees will force you to consider bankruptcy, where they might recover much less.
Key Legal Points for Dallas Businesses
- Usury and MCA Interest
Some MCA agreements impose very high fees, which can be considered usurious under Texas Finance Code Ann. § 305.001. If the rate is deemed illegally high, you might have leverage to negotiate a lower payoff. - Debt Settlement Tax Implications
If part of your debt is forgiven, the IRS may count the forgiven portion as taxable income under 26 U.S.C. § 61(a)(12). Always consult a tax professional to see if you meet any insolvency exemptions. Settling a $100,000 debt for $50,000 has potential benefits, but it also has major downfalls, like a possible 1099-C for the $50,000 difference. - Texas Deceptive Trade Practices Act (DTPA)
If a creditor or collector uses misleading tactics to collect, they may violate Tex. Bus. & Com. Code Ann. §§ 17.41–17.63. While not every aggressive collection tactic qualifies, it’s something to keep in mind if you suspect your creditors are crossing the line. - Bankruptcy Options
Filing Chapter 11 or Subchapter V may help if you need formal court supervision to reorganize. The automatic stay stops creditors from taking immediate action, but you’ll still need a workable plan to repay some or all of your debts.
Different Scenarios & Strategies
- Multiple MCA Stacking
If you’ve taken multiple MCAs, the daily or weekly deductions may leave you with no cash flow. You could negotiate a settlement for one MCA at a reduced lump sum, then consolidate or restructure the others. This can be potentially complicated—each MCA might have unique terms, so you need a plan for each. - Pending Lawsuits or Default Notices
If a creditor sues, or if you receive multiple default notices, it’s best you negotiate with your lender directly or consider other legal defenses. In some cases, we examine whether the MCA’s interest rate breaches Texas usury statutes. If so, the lender could be liable, giving you leverage to negotiate a lower payout. Meanwhile, if there’s an out-of-state COJ, you might argue it’s unenforceable under Texas law, compelling the creditor to compromise. - Asset Protection Concerns
Texas generally protects your homestead, but it doesn’t cover all personal assets. If you signed a personal guarantee, you could still face judgments. We typically advise business owners to work directly with lenders—show them the data, demonstrate why restructuring or settling benefits everyone. - Credit Implications & Future Lending
Settling a large debt can affect your credit. If you prefer to avoid a negative credit impact, you might consider a business debt consolidation loan or try invoice factoring to keep credit intact. With factoring, you exchange your accounts receivable for immediate cash. This can free up funds you can use to negotiate down an MCA.
Working with DelanceyStreet Debt Relief
We focus on direct communication with lenders. Our team reaches out immediately, showing creditors your current profit and loss statements, bank balances, and any signs of imminent insolvency. Our goal is to secure extended payment plans, reduced interest rates, or even principal reductions.
- Financial Data Review
We collect your last six months of bank statements and any signed contracts. We look for clauses that can be challenged, like potential COJ language or excessive interest rates. - Two-Pronged Approach
DelanceyStreet Debt Relief collaborates with our sister law firm (owned by attorney Steven Raiser), ensuring you have both financial strategists and legal backup if litigation is unavoidable. - Tax Planning Coordination
If a creditor agrees to forgive some debt, we want to make sure you’re aware of possible 1099-C tax forms. We strongly recommend coordinating with a tax advisor at this stage.