New York, New York Business Debt Settlement Lawyers: Handling Merchant Cash Advance Debt
Many business owners, especially those in New York, sign up for a Merchant Cash Advance (MCA) hoping to secure a quick infusion of working capital, only to find themselves faced with toxic obligations that are impossible to keep up with. Regardless – we can help you. At DelanceyStreet Debt Relief, our core focus is helping you navigate the legal and financial complicated process, filled with pitfalls, that often accompanies MCA debt. Our team understands the challenges caused by toxic MCA debt, and we’re here to provide solutions that can prevent you from going out of business.
Understanding Confessions of Judgment in New York
One major issue is the “confession of judgment,” which is allowed under N.Y. C.P.L.R. § 3218. Many MCA lenders rely on these confessions to fast-track a judgment against you if you default. Bottom line: once the confession is filed, your bank accounts might be frozen, and you could lose access to critical funds. We have a sister law firm that can quickly step in to investigate if the confession of judgment was improperly executed or if the lender breached any part of the MCA agreement. Sometimes, simply challenging the validity of the documents can buy you time—and leverage—to negotiate.
Role of Bankruptcy in MCA Debt
Sometimes, you might consider Chapter 7 bankruptcy (11 U.S.C. § 701 et seq.) to discharge unsecured debts. But Chapter 7 can mean liquidating your business entirely. An alternative is Chapter 11, which can let you reorganize if you can craft a feasible repayment plan. These options are complicated. They often involve court oversight and potential objections from MCA lenders—particularly if you signed a personal guarantee. Regardless of which path you consider, having a strong legal team by your side is crucial.
Negotiation and Settlement Tactics
At DelanceyStreet Debt Relief, we focus on open communication with your MCA provider. When you enroll in our program, we gather your most recent bank statements, merchant agreements, and cash flow projections. By proactively showing your MCA lender that you have genuine financial challenges, we can request reduced balances, lower interest rates, or extended payment terms. We often find lenders prefer settling instead of pursuing notices of default or incurring legal fees—especially if we illustrate that continuing with the current terms will cause your business to go out of business.
Scenarios We Often See
- Confession of Judgment Filed:
- Now, your business bank account is frozen, leaving you unable to pay vendors or employees.
- We check if the original MCA documents and the affidavit of confession were signed properly. If there’s a technical or procedural mistake, you may have a basis to vacate or pause the judgment.
- Multiple MCA Agreements:
- You took on additional MCAs to cover shortfalls from the first, and the debt grew until it was impossible to keep up.
- We can negotiate collectively with multiple MCA providers, aiming for reduced principal amounts or combined payment plans that fit your cash flow.
- Personal Guarantees and Lawsuits:
- You signed a personal guarantee, so the MCA provider threatens to come after your personal assets.
- We examine whether the lender followed proper protocols and if your personal guarantee is enforceable. In some cases, we can negotiate a modified settlement to protect your personal assets.
Potential Tax Implications
When a portion of your MCA debt is forgiven, the IRS may treat that forgiven amount as income. That could mean you receive a 1099-C for the forgiven sum. We think it’s important you plan ahead to avoid a large tax bill. If you work with us, we’ll help you connect with tax professionals who understand the nuances of debt forgiveness and how it impacts your bottom line.
Our Approach: Data-Driven and Transparent
DelanceyStreet firmly believes that open, proactive communication is often the best strategy. By sharing your up-to-date balance sheets, cash flow statements, and even vendor relationships, you can illustrate why a modified payment schedule is necessary. Bottom line: many MCA lenders would rather compromise than pursue a long, drawn-out legal process.
Below is a quick breakdown of key considerations:
| Strategy | What It Involves | Potential Pros | Potential Cons |
|---|---|---|---|
| Challenging Confessions | Reviewing whether the MCA lender followed N.Y. C.P.L.R. § 3218 | May stop account freezes, can invalidate judgments | Legal costs, lender may re-file if errors are minor |
| Negotiated Settlements | Requesting reduced principal, lower interest, or extended terms | Can significantly cut monthly payments, avoid court | Partial debt forgiveness might lead to tax liabilities |
| Bankruptcy (Ch.7, Ch.11) | Liquidation vs. reorganization under federal bankruptcy statutes | Discharge or restructure debt | Possible business closure, personal guarantees linger |
| Asset Restructuring | Selling or leveraging non-critical assets to pay down MCA debt | Gains immediate cash, can reduce outstanding balance | Risks to operations if assets are critical |
Common Pitfalls
- Ignoring Confession of Judgment Notices: If you don’t respond quickly, the lender can obtain a judgment without ever stepping into a courtroom.
- Misunderstanding MCA Contracts: MCA lenders often avoid the word “loan,” so standard usury laws might not apply. Bottom line: your usual defenses might not work.
- Neglecting Personal Guarantees: Once your business bank account is drained, the lender might target you personally.
Why DelanceyStreet Debt Relief
Our owner is an attorney, and that means we have a built-in sister law firm that can help if the situation escalates. We’re not just another debt relief company that charges high fees—we’re a dedicated team focused on helping you run your business. We’ve worked with hundreds of businesses, many of whom were facing default, and we consistently aim to negotiate lower balances, reduced interest, and workable payment terms. In many cases, clients are able to avoid bankruptcy altogether.
In the end, it comes down to having the right strategy, at the right time. Merchant Cash Advances are fundamentally different from traditional loans, with unique legal nuances. Bottom line: many business owners are dealing with MCA debt, because they were hoping to grow – and we can help you. There are ways to address your situation. We can help you figure out the best path forward. By focusing on negotiation, examining legal defenses, and planning for tax implications, we do everything possible to keep your business open and stable.
If you’re ready for help or simply want to explore your options, contact us today. We’ll look at your contracts, your cash flow, your outstanding debts—everything. Then we’ll form a strategy that makes sense, so you can focus on growing your business.