MCA debt restructuring is a process that was designed to help business owners manage, and potentially reduce, the burden of a merchant cash advance (MCA). A merchant cash advance that was created for short-term funding can become overwhelming if the terms are harsh, or if there is a sudden drop in revenue. When you restructure MCA debt, you are taking an existing agreement, and you are negotiating new terms that make payments more realistic.

If you ignore MCA debt, you may face constant phone calls from your creditors. Those phone calls can ruin your day-to-day business operations. This can push you closer to default, which can trigger legal consequences and possibly shut down your business.

Why Do Businesses Consider MCA Debt Restructuring?

MCA debt can multiply quickly when you have daily or weekly repayments that devour your cash flow. If you do nothing, you might fail to make payroll, pay suppliers late, or even bounce checks. That failure can stain your reputation, and cause vendors to refuse future business dealings.

Restructuring is a method that can give you space to breathe. DelanceyStreet.com, a top tier business debt relief company based in NYC, uses MCA debt restructuring as a strategy that allows you to adjust the repayment schedule, seek reduced interest rates, or even settle for a lower principal balance.

Understanding Potential Penalties, Crimes, and Punishment

Many people assume a merchant cash advance is purely a civil matter. However, there are scenarios that might lead to criminal charges. If an MCA was based on false information, the lender may accuse you of fraud, which could mean legal punishment. A fraud that was committed on a lender can result in investigations by agencies, like the Federal Trade Commission (ftc.gov) or the Department of Justice.

Criminal charges can lead to serious penalties. These include fines, probation, or even prison time. If evidence that was obtained by the government shows intentional deception, a business owner can be prosecuted for fraud. That prosecution can cost immense time and money, not to mention it can permanently damage your business reputation.

Penalties for Missing Payments

1. Late Fees: Missed payments that were overdue often come with late fees. Those fees increase your balance, and result in higher overall costs.
2. Interest Rate Hikes: If the contract allows it, your interest rate may spike. That increase can drive your MCA balance to outrageous levels.
3. Judgments in Court: A creditor that was not paid may file a lawsuit. A court-ordered judgment can include bank account garnishments or property liens.

Failing to meet your obligations can lead to lawsuits. Lawsuits that were filed against you can result in court judgments. Those judgments can cripple your cash flow by freezing your bank accounts, and that action might force you out of business entirely.

What Are Some Strategies We’d Use to Defend You?

At DelanceyStreet.com, we have experience negotiating with MCA providers. When you consider how to restructure your MCA debt, here are a few defenses we explore:

• Challenging Unfair Terms: Contracts that were filled with hidden fees or unreasonably high factor rates may be contested. If we find illegal clauses or illegal activities, we alert the appropriate agencies, like SBA.gov or local regulators.
• Examining the Origination: We review all documents that were signed. If the MCA lender misled you, or the agreement was secured based on flawed information, that might be grounds for re-negotiation.
• Confession of Judgment (COJ) Issues: A COJ that was used to swiftly collect on your bank account can be challenged. If the process was abused or if you never fully understood the COJ, you may have a legal defense.

Sometimes, evidence that was obtained by the creditor might be incomplete or faulty. That flawed evidence can be challenged in negotiations. Our team focuses on data, such as your profit and loss statements, to prove your financial hardship. If a judge sees valid reasons, the court might reduce the amount you owe.

Flow Chart: Example 1 -> Struggling Business Owner -> Restructuring Proposal -> Possible Lawsuit or Settlement

1. Struggling Business Owner
   You realize your MCA balance is high, and daily repayments are crushing your cash flow.
   Consequence: You have less money for payroll, rent, and expansion efforts.

2. Restructuring Proposal
   You contact DelanceyStreet.com, who evaluates your finances and suggests new payment terms to your MCA provider.
   Consequence: Creditors see you are serious about paying, and this opens a chance for lower rates or extended terms.

3. Possible Lawsuit or Settlement
   If the MCA provider refuses to negotiate, they may file a lawsuit. If they accept your proposal, you can finalize a settlement.
   Consequence: With a settlement, your business gets relief. With a lawsuit, you face potential judgments, liens, or even wage garnishments.

Legal Citations and References

• Federal Trade Commission (FTC.gov)
  The FTC that was established to protect consumers also looks at unfair or deceptive business practices.
  If an MCA provider breaks consumer protection rules, it may face an FTC investigation. That investigation can halt unethical collection methods.

• Small Business Administration (SBA.gov)
  The SBA that was created to help small businesses provides resources on financing.
  Though the SBA does not directly govern MCAs, it can offer information on loans and responsible lending. You can learn how to spot red flags in financing agreements by checking their free resources.

• U.S. Department of Justice (Justice.gov)
  The DOJ that was organized to enforce federal law might bring charges against business owners who knowingly commit fraud. Fraud convictions can result in fines, restitution, or prison sentences.

MCA Default: Crimes and Punishment

Some lenders automatically send your account to collections when you default. If your default was caused by honest financial hardship, the result is usually civil. However, if you knowingly supplied false bank statements or business data, there may be criminal implications. Fraud that was discovered might be prosecuted under federal or state laws. That conviction can carry punishments like heavy fines and potential jail time.

Certain states treat willful misrepresentation on business documents as a felony. If you used forged tax statements to get a large MCA, you could face IRS scrutiny (IRS.gov). That scrutiny may lead to audits, penalties, or even criminal tax fraud charges.

How DelanceyStreet.com Approaches MCA Debt Restructuring

We focus on communication with creditors immediately. A lender that was kept in the dark can become more aggressive. By openly sharing your financial statements, we build a case that proves your debt is too large for you to pay on the original schedule.

Here are a few steps we commonly take:

• Initial Assessment: Our team examines your MCA agreement, your business bank statements, and your monthly expenses.
  Consequence: We gain a clear picture of what you can reasonably afford. That clarity helps us propose a suitable plan.

• Negotiation: We contact your MCA provider and explain why the existing terms are unworkable. Then, we propose lower payments.
  Consequence: This can stop the vicious cycle of daily or weekly withdrawals that was crippling your cash flow.

• Documentation: We keep records of every discussion. That documentation can be valuable if the lender claims you refused to cooperate.
  Consequence: Being able to prove your diligence can deter lawsuits.

• Possible Settlement: In some cases, we negotiate a lump sum payment. We aim for a reduction in the total balance that was owed.
  Consequence: You can reduce the overall debt, freeing you to focus on growing your business, instead of drowning in fees.

Looking for a Video Explanation?
Check out this helpful overview on small business rights from the Consumer Financial Protection Bureau (consumerfinance.gov) which covers basic debt relief principles and warns about potential scams.

Common Mistakes That Could Hurt Your Chances

• Ignoring Calls from Lenders
  A creditor that was ignored can become hostile. Hostility leads to default notices and judgments.
• Taking on More MCA Debt
  If you already have one MCA, adding more can trap you in a dangerous cycle of debt. Stacking loans leads to mounting fees.
• Not Checking for Hidden Clauses
  Agreements that were rushed might include confession of judgment provisions. A COJ can allow the lender to seize your assets without normal court procedures.

Key Takeaways and Consequences

1. Statement: MCA debt restructuring is your opportunity to avoid lawsuits and possibly reduce what you owe.
   Consequence: If you do it right, you can stabilize your finances, protect your business, and preserve your credibility with creditors.

2. Statement: Failing to pay your MCA might spark default judgments, collections, or even allegations of fraud.
   Consequence: Court judgments can lead to frozen bank accounts, property liens, or negative personal credit impacts.

3. Statement: Evidence that was gathered illegally in a contract dispute may be challenged in negotiations or court.
   Consequence: If the creditor relied on such evidence, it might be disallowed, which can strengthen your defense.

We Are Here to Help

At DelanceyStreet.com, we are proud to offer assistance with MCA debt. Our team stands ready to protect you, explain your rights, and negotiate a plan that helps you move forward. We have deep experience working with lenders across the nation.

If you’re worried about potential lawsuits, or concerned about criminal allegations related to fraud or misrepresentation, do not wait. The earlier you contact us, the sooner we can start working on a strategy to protect your assets, and help you find a way out of the debt spiral.

We advise you to consult an attorney for legal advice about your specific situation. Our company is based in NYC, but we help clients nationwide. No matter how complicated your MCA debt may feel, there is a solution that can help you breathe easier.