San Jose Business Debt Settlement and Merchant Cash Advance Lawyers
If you own a small business in San Jose and are struggling with overwhelming debt, you may feel like there are no good options. Between predatory merchant cash advance (MCA) lenders charging exorbitant interest rates and aggressive debt collectors harassing you, it can seem hopeless.But there is help available. Working with an experienced business debt settlement attorney can give you leverage to negotiate settlements on unsecured debts for pennies on the dollar. They can also help defend against lawsuits from MCA lenders and halt illegal collection practices.
How San Jose Business Debt Settlement Attorneys Can Help
A business debt settlement lawyer has in-depth knowledge of creditor-debtor laws and the tactics used by banks, creditors and collection agencies. They use this expertise to protect your rights and get debts reduced or eliminated.Specific ways a San Jose small business debt settlement attorney can help include:
- Negotiating settlements – An attorney has far more leverage negotiating directly with creditors and MCA lenders than a business owner does on their own. They can often settle tax debts, credit cards, personal loans and merchant cash advance balances for 20-50% less than you owe.
- Defending against lawsuits – If creditors sue your business for nonpayment, a debt settlement lawyer handles the response and defends you in court. They fight back against unfair default judgements.
- Stopping harassment – Attorneys send cease and desist letters to collectors who are calling you illegally or making false threats. They take legal action to halt harassment.
- Protecting your assets – By asserting your rights under lending and debt collection laws, lawyers keep creditors from seizing valuable business assets or garnishing your bank accounts.
- Improving cash flow – Attorneys also look at the big picture of your finances to reduce expenses, improve revenues and get your business back on stable footing.
Debt settlement lawyers do charge attorney fees. But their expertise often saves clients far more money by slashing debts and avoiding costly legal judgements. For business owners overwhelmed by debt, their knowledge pays for itself many times over.
The Risks of Merchant Cash Advances
One major source of crippling small business debt comes from merchant cash advance lenders. MCA loans provide quick access to capital based on a business’s credit card receivables.
Pros of merchant cash advances:
- Fast approval and funding in days
- Few eligibility requirements
- No need for collateral
- Payments scale based on sales
Cons of merchant cash advances:
- Equivalent to 60-300% APR interest rates
- Daily/weekly payments create cash flow issues
- Hard to pay off during slow sales periods
- Personal guarantees often required
- Default triggers aggressive collections & lawsuits
- Easy to get trapped in predatory lending cycle
While MCAs may seem like an easy fix for cash flow issues, they frequently do more harm than good. San Jose business attorneys often see clients struggling with the following common legal issues related to merchant cash advances:
Common MCA Legal Issues
Lawsuits & Judgements
When small businesses fall behind on daily MCA payments, lenders immediately file lawsuits against both the business and its owners. Many predatory MCA companies get fast-track default judgements without ever having to prove their case in court. This allows them to seize financial accounts and assets.Fighting back requires an attorney to dispute improper contracts and defend against unfair lawsuits. They also negotiate settlements so owners avoid personally liable judgements.
Confessions of Judgement
The MCA contracts businesses sign frequently include a built-in “confession of judgement.” This gives lenders a shortcut to getting a judgement if borrowers default on payments. Owners waive their rights to dispute the lender’s claims.Attorneys fight to get these often illegal confessions thrown out of court to prevent lenders from improperly seizing assets.
Asset Seizure & Bank Levies
Once armed with a judgement, MCA lenders can freeze bank accounts, garnish merchant accounts and seize valuable business property to satisfy debts. An attorney can respond quickly to levies with exemption claims and demands for assets to be returned.
Illegal Collections Harassment
Aggressive MCA collectors frequently resort to illegal harassment tactics like nonstop phone calls, false threats of legal action, and contacting third parties about debts.Debt settlement lawyers send cease and desist notices to immediately halt illegal collection practices. If harassment continues, they take the collectors to court for violations of fair debt laws.
The bottom line – Merchant cash advances seem tempting but often do catastrophic damage to small businesses. Working with an attorney helps owners avoid the legal pitfalls of predatory MCA loans.
Beware MCA Debt Consolidation Offers
When struggling with overwhelming MCA loan payments, desperate business owners often get bombarded with offers to “consolidate” their debts into a single, lower payment loan.In reality, most MCA consolidation loans just bury owners deeper in debt:
- New loans come from MCA affiliates charging more fees & interest
- Payments only provide temporary relief before increasing again
- Personal assets get put up as collateral
- Missed payments lead to cross-collateralization clauses
- Easy to default again and owe far more money
The new consolidated loan is often no better than the original predatory merchant cash advances. Business owners need an attorney to review any MCA consolidation offer and negotiate better terms. In many cases, settlement or bankruptcy are better options than consolidation traps.
Using Bankruptcy to Eliminate Small Business Debt
For some overburdened San Jose business owners, bankruptcy can provide the clean slate needed to rebuild and move forward. The most common types of bankruptcy filings include:
Chapter 7 Business Bankruptcy
This liquidation bankruptcy halts collections and wipes out eligible unsecured debts like credit cards, personal loans, lines of credit, trade debts and merchant cash advances. Owners surrender collateral assets but get to keep exempt property.Chapter 7 bankruptcy won’t eliminate taxes, alimony/child support or most student loan obligations. But for businesses buried under unsecured debts, it provides fast debt elimination.
Chapter 11 Business Bankruptcy
Unlike Chapter 7, Chapter 11 is a reorganization bankruptcy where owners keep operating the business. It stops collections, consolidates debts into a single payment, and gives up to 5 years to repay at lower interest rates.Chapter 11 also allows businesses to reject expensive leases and contracts. But it comes with more legal fees upfront and strict court oversight.
Chapter 13 Personal Bankruptcy
If business debts are personally guaranteed, owners can discharge their liability while keeping the business open using a Chapter 13 personal bankruptcy. It requires 3-5 years of court-managed debt repayment using disposable income. At completion, the remaining IOUs get discharged.
Finding the Right Attorney for Your Situation
The legal complexities of business debt make trying DIY settlement negotiations extremely risky. San Jose small business owners need an advocate to handle communications and represent their best interests.When choosing a business debt relief attorney, key traits to look for include:
Specialization in business law – Not all law firms handle the intricacies of commercial lending contracts. Seek out those with in-depth experience dealing specifically with business debt issues.
Settlement expertise – For debt reduction, you want a lawyer with a proven track record of negotiating win-win debt settlements with creditors. They use their leverage to get debts eliminated for pennies on the dollar.
Litigation skills – Understands complex contract law, creditor-debtor statutes and can vigorously defend against collection lawsuits using validated legal defenses.
Upfront about all options – Ethical lawyers explain the pros/cons of settlements, bankruptcy, payment plans and consolidation loans so owners understand impacts. Beware promises of fast/easy debt relief.
