Dallas, Texas MCA Defense Lawyers
Understanding MCA Debt in Dallas
Many business owners end up taking a Merchant Cash Advance (MCA) because they were hoping to grow; or perhaps they needed a life line. Either way, now – that MCA debt is toxic, and it’s impossible to keep up. For countless Dallas businesses, the looming threat of legal action can feel overwhelming.
At DelanceyStreet Debt Relief, we focus on all types of unsecured business debt, especially for business owners who are failing to keep up with daily MCA payments. Our approach involves careful review of your MCA contract, and if necessary, leveraging our sister law firm to help assert your legal rights in Texas. When you work with us, you’re creating a way to avoid going out of business.
Why Dallas MCA Defense Matters
In Texas, many MCA providers try to operate outside traditional lending laws by labeling their agreements “factoring” or “purchase of receivables.” Often, they argue this arrangement isn’t a loan, so it shouldn’t be subject to Texas usury laws. But there are times when the contract looks and acts like a loan—especially if you’re locked into fixed daily or weekly repayments. If that happens, you might have a valid usury argument under the Texas Finance Code §§ 302.001–305.008. This is a strategic conversation, which requires you to have the best possible team on your side.
Moreover, some MCA agreements include personal guarantees, which put your personal assets at risk. Other times, they might contain forum selection clauses, which can force you to litigate in a faraway jurisdiction. Our role is to sort through these complexities, map out your defenses, and provide a way to manage your debt. Regardless – we can help you.
Multiple Defense Strategies, with Real Scenarios
We often see Dallas business owners who have stacked MCAs—meaning they took on another MCA to pay off the first, and the pattern repeats. Each MCA demands daily or weekly payments, and soon, cash flow is at zero. Our team considers all possible solutions:
- Open Communication and Negotiation
- Scenario: You’re already late on payments, and the MCA provider is threatening a lawsuit.
- How It Works: We step in, communicate with the lender, explain your financials, and look for ways to reduce your principal or stretch out your term.
- Outcome: Negotiating can stop a pending legal action and often leads to more manageable terms.
- Asserting a Usury or Illegal Loan Argument
- Scenario: Your “factoring agreement” charges extremely high interest, which feels more like a loan.
- How It Works: We scrutinize the agreement to see if it violates Texas usury laws. If it does, you may be entitled to statutory penalties or reduced interest.
- Outcome: This can reshape the contract, often resulting in a reduced overall balance.
- Texas Deceptive Trade Practices Act (DTPA)
- Scenario: The MCA provider promised certain benefits or withheld crucial details when selling you the agreement.
- How It Works: Under Texas Business & Commerce Code §§ 17.41–17.63, you can file a counterclaim if the lender’s actions were deceptive.
- Outcome: This can encourage the MCA company to settle quickly or face additional legal scrutiny.
- Bankruptcy Protections
- Scenario: Your business is struggling to stay afloat, and the MCA provider is attempting to seize assets.
- How It Works: Chapter 7 or 11 of the U.S. Bankruptcy Code can halt collection efforts, which can give you time to reorganize or liquidate as needed.
- Outcome: Bankruptcy might not be ideal for everyone, but it can provide breathing room if you’re truly overwhelmed.
- Addressing Tax Consequences
- Scenario: You settle with your MCA lender, and they agree to forgive a large portion of the debt.
- How It Works: You may get a 1099-C, which means potential taxable income. We’ll walk you through the importance of consulting a CPA, so you can avoid potential pitfalls.
- Outcome: A well-timed conversation with a tax professional can help you avoid additional taxes or fees.
One Table Summarizing Key MCA Defense Strategies
| Strategy | Relevant Law/Provision | Likely Outcome |
|---|---|---|
| Negotiation & Settlement | Contract Law, Open Communication | Reduced principal or interest, extended payment terms, avoidance of lawsuit |
| Usury/Illegal Loan Argument | Texas Finance Code §§ 302.001–305.008 | Possible damages against the lender, or contract reformation |
| DTPA-Based Counterclaim | Texas Bus. & Comm. Code §§ 17.41–17.63 | Settlement leverage, potential damages if deception is proven |
| Bankruptcy (Chapter 7 or 11) | Title 11 U.S.C. | Automatic stay on collections, structured reorganization or liquidation |
| Tax Planning After Debt Forgiveness | IRS Regulations & 1099-C Filings | Minimize taxable income from forgiven debt through strategic planning |
Realistic Pitfalls and How to Avoid Them
Many businesses ignore initial warnings from MCA lenders, hoping the problem will go away. In Texas, though, lenders can file suit and quickly secure a default judgment if you fail to respond. Once they get a judgment, they can garnish your business bank accounts—leaving you with no cash to pay vendors or employees.
Some owners consider taking on another MCA to pay the previous one, which can lead to bigger problems later. Others think they can sidestep the debt by dissolving and relaunching under a new entity, but certain legal doctrines can still link the new entity to old liabilities. Having a clearly defined legal strategy from the start is important.