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Will the MCA lender sue me if I try to settle?
Will the MCA lender sue you if you try to settle? Likely. They sue. They always sue. When businesses try to negotiate, MCAs will pursue legal actions aggressively. But we’ve helped businesses win—even if it’s just a partial win. Let’s talk about how we’ve done it and how we’ll keep doing it. The thing about MCAs—they’re structured as purchases of future receivables, but we all know the truth. The lenders? They act like it’s a loan, forcing daily payments with zero regard for your business’ cash flow.
You’ll ask, “Can we fight this?” and the answer is yes. But you need an attorney who’s ready to push back against these predatory contracts. At DelanceyStreet, we fight hard because these lenders will bankrupt you if they can.
State Laws and Specific MCA Challenges
In New York, MCAs love using Confessions of Judgment (CoJ)—automatic judgments without a trial. They’re brutal, but we can challenge them. NY State Law has been pushing back on these CoJs since 2019, limiting their power. This makes a huge difference in negotiations. Kapitus Servicing, Inc. v. Suburban Waste Services, Inc. was a game-changer. This case showed how vague reconciliation clauses can work against the lender. The court decided that vague terms made the contract look more like a loan—not a sale of receivables.
You have to understand how reconciliation clauses are supposed to work.
A real factoring agreement? Payments fluctuate with receivables.
But MCA contracts often use fixed daily payments, which tie up your cash flow, making it impossible to keep up.
When courts see fixed payments, they lean toward treating it as a loan. Why? Because loans have fixed payments. Sales of receivables? They should be variable. This matters a lot when we argue that your MCA is a disguised loan.
MCA Terms in Bankruptcy and Precedent Cases
What about bankruptcy? Here’s where MCA contracts get ruthless. They let the lender go after you immediately, enforcing personal guarantees even when you’re bankrupt. That’s a loan move, not factoring. Bankruptcy laws protect you from this kind of recourse. In California, we see class-action lawsuits pushing back on MCAs because state laws are tighter around how these agreements can operate. California Business and Professions Code prevents unfair business practices, and we use it to invalidate predatory contracts.
You’re probably thinking, “Can’t they just come after my business assets?” But we’ve used asset protection strategies to shield key assets from seizure. I’ve seen businesses survive because they protected the right things at the right time. One of our clients in Florida had their MCA payments reduced after we challenged the contract’s fixed-payment structure. They thought they’d lose everything, but we fought back and won a partial victory. Their business is still running today.
Settlements and Lump Sum Payments
Settlements work. But it takes expertise. Many times, we negotiate a lump sum payment that’s less than what the MCA is demanding. Lenders prefer settlements over the unpredictability of court. Why? Because we know how to win.
And even when they don’t settle, we still win.
We use state usury laws to argue that the MCA disguised a high-interest loan.
In New York, interest rates exceeding 25% are criminal usury, so we challenge factor rates that mirror loan interest.
It’s not just about “getting out.” It’s about winning. Sometimes a partial win—reducing your payments, or modifying the terms—keeps your business afloat. We’ve saved businesses from financial ruin with partial victories, and a win is a win when survival’s at stake.
Partial Victories and State-Specific Legal Approaches
In Kapitus, we saw how the court viewed the lender’s immediate recourse in bankruptcy as a loan-like feature. That’s a key precedent. If the lender’s recourse is too aggressive, courts will favor reclassifying the MCA as a loan. Here’s where we really shine—challenging the contract’s structure. In Illinois, we’ve used UCC Article 9 to challenge how MCAs secure collateral. If they don’t follow proper procedure, we can have their claim dismissed.
We know the laws, and we use them. In Kapitus, vague reconciliation terms weren’t enough to prove it was a sale of receivables. That vagueness? It works in your favor. The court saw it as a loan, and that opened the door for us to win.
Asset seizure? In some states, like Texas, attorneys can use the Texas Business and Commerce Code to argue against lenders who try to enforce excessive judgments. Protecting assets is key to keeping your business running.
Don’t think for a second that MCA lenders won’t use every trick in the book.
They’ll threaten lawsuits, and they’ll use scare tactics.
But we’ve seen it all. You don’t have to panic.
Personal Guarantees and Confessions of Judgment
Personal guarantees—they love using those, but we can challenge them. Some states are making it harder for MCA lenders to enforce these, especially in cases where the terms of the guarantee conflict with state law. Confessions of Judgment? Those might sound terrifying, but we’ve beaten them in court, especially with the new restrictions in New York and California. You might ask, “How do you fight a confession of judgment?” Well, New York’s recent reforms are a good start. They now require more transparency and prevent out-of-state judgments. We use this to throw out those judgments before they even hit.
Case Examples from Across the U.S.
Our team has saved businesses across New Jersey and Texas using similar strategies. In fact, in New Jersey, we’ve leveraged consumer protection laws to fight back when MCAs acted deceptively. I remember a case in Michigan—the lender was relentless. But we used Michigan’s Debt Collection Laws to stop them from seizing assets illegally. We won. They backed off, and my client kept their business.
You don’t need to fear these lenders. When you work with us, we’ll fight tooth and nail to protect your assets, negotiate settlements, and challenge unfair practices. Here’s why we win—we dig into the contract. If there’s a vague clause, we’ll use it. If there’s a loophole, we’ll find it. And we’ll use every precedent, every law that supports our case.
Some of the most satisfying wins? Partial victories. I’ve seen clients breathe easier because they could keep their doors open, even when they couldn’t wipe out the debt entirely. That’s still a win.
The Power of Partial Victories and Kapitus Case Influence
Don’t underestimate partial victories. Even when we can’t eliminate the debt, we can make it manageable. And that? That can be the difference between surviving and closing shop. Every state has its laws, but we know how to adapt. In Florida, we’ve reduced daily payments by proving that the repayment terms violated state law. That’s how we protect our clients.
Kapitus v. Suburban Waste taught us a lot. The court’s decision? That vague reconciliation and fixed daily payments pointed toward a loan, not a sale of receivables. That’s a win we’ll keep using. We’ve helped businesses fight back across California, Texas, New Jersey, and New York. And we can help you too. Call us at 212-210-1851, because your business doesn’t have to be destroyed by MCA lenders.