A debt relief attorney can help after a merchant cash advance default


By ,
Ask a Lender
November 2, 2017 | Updated November 7, 2017


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Key Points

Find a merchant cash advance debt relief attorney

  • Debt relief attorneys help clients get out of debt
  • A debt relief attorney could help you declare bankruptcy or settle the debt
  • Online searchable databases make it easy to find an attorney
  • Meet with the attorney and ask lots of questions
  • Be prepared to pay a retainer, monthly fees and a completion fee

If your business has defaulted on a merchant cash advance, it’s wise to consider steps to protect yourself and your business. One way is to solicit the services of a debt relief attorney who can help you assess your options and work to get out of debt.

Businesses sometimes take out a merchant cash advance, a relatively quick and easy way to get a sum of money. To repay the advance, businesses agree to allow a cash advance provider to collect money from future credit- and debit-card transactions until the debt is repaid. The MCA provider typically reviews the business’s credit card volume to determine the company’s ability to repay. But sometimes situations change. If credit card transactions plummet, the business may find itself with outstanding debt it’s unable to pay off.

Defaulting on a cash advance

Once you’ve defaulted on the debt, providers may begin legal steps to attempt to collect the outstanding debt. If you signed a personal guarantee or agreed to an acceleration clause in your MCA agreement, the provider also may have the right to pursue your personal assets.

An acceleration clause gives the provider the right to demand that the outstanding debt be paid in full if the borrower fails to pay. If the cash advance agreement also includes a personal guarantee, then the business owner — not the business entity — is liable for the outstanding debt. That means the provider may take legal action against the business owner and attempt to seize personal assets to collect on the debt.

There are several ways business owners could deal with an MCA default, such as by declaring bankruptcy or settling the debt. A debt relief attorney can apprise you of your legal options if a provider files a lawsuit against you to collect outstanding MCA debt.

It’s important to find an attorney as soon as possible once you’ve been notified of a lawsuit. Failing to respond to legal action in a timely manner could result in a default judgment against you. Debt relief attorneys can also help strategize options for reducing debt before legal action is taken.

Finding a debt relief attorney

Though it’s unlikely an attorney has built a practice entirely on MCA cases, an attorney specializing in debt relief likely has experience working with borrowers who have taken out merchant cash advances and run into problems.

Debt relief attorneys, true to their name, help their clients find ways to reduce or eliminate debt that they’re unable to pay off. Whether it’s negotiating a debt settlement or helping a client file for bankruptcy, debt relief attorneys are well acquainted with the legal options available to those struggling with debt.

Once you have a handle on your situation and how a debt relief attorney can help, how do you find a reputable attorney to help you?

Speaking with peers in your industry and asking if they know any reputable debt relief attorneys can be a good starting place. Alternatively, numerous websites offer searchable databases of attorneys online. Often, you can filter search results to see debt relief attorneys specifically.

After collecting some promising leads, how do you narrow the field? Consider such factors as the size of the attorney’s firm; the attorney’s experience — especially in debt relief; education and awards; and reviews from past clients. Of course, you may also want to confirm through your state bar association that their license is current.

Next, schedule meetings with an attorney, either in-person or over the phone. Keep in mind that some attorneys charge a fee for consultations. The initial consultation is an opportunity to evaluate the attorney and learn more about their background and how they will conduct business with you. Ask them about their experience working with cases similar to yours.

When you’ve chosen an attorney to work with, you’ll likely be asked to pay a retainer totaling about 5 percent of your outstanding debt. The attorney may ask you to pay a small monthly fee as they negotiate your debt, and charge a larger fee after the successful discharge of your debt. Carefully evaluate the fees against your outstanding debt and anticipated savings. If an attorney is able to negotiate a reduction in your debt, the attorney fees may be worth it as long as they don’t exceed the amount the attorney saves you in debt reduction.

Alternatives

Debt relief attorneys aren’t the right choice for every situation. Common alternatives are working with a debt settlement company, negotiating with creditors yourself or working with a credit counselor.

  • Debt settlement companies. Debt settlement companies negotiate with creditors for a fee. Unlike a debt relief attorney, however, these companies can’t represent you in court or sue on your behalf if a creditor violates consumer protection laws. Additionally, the Consumer Financial Protection Bureau (CFPB) warns that practices employed by debt settlement companies can damage a person’s credit score.
  • Negotiate yourself. If you’re not yet ready to explore major actions, such as filing for bankruptcy, it may be worth it to negotiate with your creditors yourself. According to the CFPB, many creditors have preset policies outlining how much debt they will forgive; in these instances, you may be as successful as debt settlement companies or attorneys.
  • Credit counselors. Nonprofit credit counselors work with debtors to reduce the monthly payments and interest rates on the debt. This allows creditors to pay down the principal balance to get out of debt faster. Many firms have arrangements with creditors to help debtors restructure their debt; debt settlement companies typically don’t have such arrangements.

Whatever option you choose, be sure to thoroughly research which is best for your particular situation. Though it can take hard work and patience, it’s possible to get yourself out of debt.


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