MCA Defense Lawyers Provide Expert Guidance on Business Debt Relief

Getting behind on business debts can feel overwhelming and scary. Between merchant cash advances (MCAs), loans, lines of credit, and other financial obligations, it’s easy for companies to accumulate more debt than they can reasonably manage. If you’re struggling with business debt, know there are experienced attorneys who can help.

Understanding Your Business Debt Relief Options

The first step is gaining clarity on the full scope of debts owed and then exploring customized relief solutions. An attorney can conduct an in-depth financial review and provide tailored advice for your situation. Common options include:

• Debt consolidation – Combining multiple debts into one new loan with better terms. This simplifies payments and can reduce interest rates.
• Debt settlement – Negotiating directly with creditors to pay a lump sum that is less than what you owe. This requires having the upfront cash available.
• Bankruptcy – Filing for Chapter 7 bankruptcy liquidates company assets to pay debts, while Chapter 11 restructures debts under court supervision. This negatively impacts business credit scores.
• Debt restructuring – Working with creditors to renegotiate repayment terms, which may involve reducing interest rates, waiving fees, or extending loan maturity dates.

The best approach depends on your specific debts, assets, cash flow, and business goals. An attorney can objectively weigh the pros and cons of each option.

Defending Against MCA Lawsuits

Merchant cash advances (MCAs) involve getting a lump sum in exchange for a percentage of future sales. MCA providers can be extremely aggressive with collections. It’s not uncommon for them to sue business owners personally when unable to garnish business accounts.If you get hit with an MCA collections lawsuit, it’s critical to respond quickly. An attorney can review the lawsuit documents and advise on the best legal defenses. For example:

• Improper service of process – If you weren’t properly served notice of the lawsuit, the court may dismiss the case.
• Breach of contract – If the MCA provider didn’t uphold their end of the agreement, that’s grounds for a counterclaim.
• Unconscionability – MCA contracts sometimes contain unfair or deceptive terms. This can make them void or voidable.
• Statute of limitations expirations – Debt lawsuits must be filed within a certain timeframe that varies by state.

Having an attorney send a demand letter contesting the lawsuit can get the plaintiff to withdraw it. Failing that, skilled legal representation is essential for navigating court hearings, filings, negotiations, and trial.

Managing Tax Implications

Any form of business debt relief – whether it’s a discounted settlement, canceled debt from bankruptcy proceedings, or restructured loan terms – may have tax consequences.

• With debt forgiveness, the canceled debt is generally considered taxable income. This means you may owe income tax on the forgiven amount.
• Some small business owners can exclude canceled debt from taxable income if certain criteria are met around insolvency. An attorney can determine if you qualify.
• Any assets liquidated in a Chapter 7 bankruptcy trigger capital gains taxes if sold for more than their tax basis.
• Certain court-approved Chapter 11 bankruptcy restructurings allow you to defer canceled debt income and spread it over multiple tax years.

Addressing the tax impacts is key. The last thing you need is a surprise tax bill down the road. Be sure to consult both a business bankruptcy lawyer and tax professional.

Protecting Your Assets

Lawsuits from unpaid MCA debts frequently target both company assets and personal assets of the business owner as repayment sources. It’s imperative to separate business and personal finances for protection.An attorney can advise on the best corporate structure and asset protection strategies, which may include:

• Forming a corporation or limited liability company (LLC)
• Keeping business and personal bank accounts totally separate
• Avoiding personal guarantees on business loans
• Setting up trusts or other entities to hold high-value assets like real estate
• Transferring ownership of certain assets to spouse or heirs

The goal is insulating personal assets and preserving your family’s financial security. While no approach is 100% guaranteed, proactive legal planning can help shield assets from creditors.

Rebuilding Your Business Credit

The black mark of collections, judgments, and bankruptcy can trash a business’s credit reports for years. This makes it much harder to get approved for affordable financing in the future.Rehabilitating business credit scores and profiles is a gradual process, but there are positive steps you can take:

• Consistently pay all debts on time going forward
• Only apply for credit when truly needed
• Limit credit checks by lenders and others
• Correct errors on business credit reports
• Request goodwill adjustments on paid collection accounts
• Get credit limits raised on existing accounts

It will realistically take 12+ months of responsible credit management to start seeing business credit scores rebound. But the long-term benefits are worth the patience and diligence.

Finding the Right Business Debt Relief Attorney

Navigating complex debt and legal situations is emotionally and financially draining without knowledgeable legal guidance. The stakes are high, so it’s critical to have an experienced attorney fighting for the best possible outcome.Here are top tips for choosing business debt relief representation:

• Search state bar association directories – All licensed attorneys are listed publicly. This allows you to identify bankruptcy and debt relief specialists nearby.
• Verify credentials and disciplinary history – Double check credentials on your state law board website. Also search for any past disciplinary actions.
• Read online reviews – Client reviews can give insight into responsiveness, legal expertise, communication skills and overall service.
• Ask about case experience – Find out how many similar cases they’ve handled and their track record of successes. Specialization matters.
• Understand fee structure – Fee arrangements range from hourly to flat rate. Get all pricing and payment expectations outlined clearly upfront.
• Trust your gut instinct – The intangibles of rapport, trust and confidence are crucial. Go with the attorney relationship that feels right.

Do your due diligence to get matched with a skilled and reputable attorney. Establishing a collaborative partnership lays the groundwork for tackling business debts strategically. Relief is possible, so don’t lose hope.

Frequently Asked Questions

What are the first steps to address business debt?

The first critical steps are to compile records on all outstanding debts, review contracts and statements thoroughly, assess cash flow and assets, and start prioritizing communication with creditors. This financial snapshot allows an attorney to outline debt relief options and next best steps specific to your situation.

Should I close struggling business bank accounts?

Temporarily closing primary business accounts can be an effective safeguard if aggressive MCA collectors have access via ACH debits or payment processors. Have the attorney send cease & desist letters first. Keep detailed records on closing any accounts and opening alternate ones. The goal is maintaining operations while preventing involuntary debits.

What business debts can’t be discharged through bankruptcy?

Certain debts are non-dischargeable through bankruptcy, including court fees, recent taxes, payroll withholding taxes, and fraudulently obtained loans. Priority business debts for wages, contributions to employee benefit plans, customer deposits, and child support/alimony also cannot be discharged.

How do I fund a business debt settlement?

Debt settlement often requires having a lump sum payment available upfront to negotiate discounted payoffs. Business owners fund settlements via business revenue, investors, sale of assets, taking loans against property equity, retirement account withdrawals, or payment plans with settlement firms. The funding approach depends on your financial means.

Can I renegotiate with an MCA provider first?

You can try negotiating directly with MCA providers to improve unaffordable repayment terms before pursuing legal action. However, many MCA companies are unwilling to offer concessions or workable solutions. Given egregious contract terms and aggressive collections tactics, it’s usually best to involve legal counsel quickly.

In Summary

Dealing with overwhelming business debt feels lonely and scary. But a knowledgeable attorney can help assess your situation, explain what debt relief options exist, and then fight fiercely on your behalf every step of the way – whether it’s defending against lawsuits, negotiating with creditors, or navigating complex bankruptcy proceedings. Support and hope exist. Please reach out today to start the process.