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What Happens if You Stop Making Merchant Cash Advance Payments?

February 24, 20242 min read

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Consequences of Defaulting on an MCA

  1. Aggressive Collection Efforts: Expect persistent and aggressive attempts from the MCA provider to collect the owed amount. This can include constant phone calls, letters, and potentially harassing tactics.
  2. Potential Lawsuits and Judgments: MCA providers may sue for the remaining balance if you default, leading to lawsuits, court judgments, and possibly wage garnishments or asset seizures.
  3. Damage to Personal Credit Score: Although MCAs are based on business performance, defaults can impact your personal credit. This can affect your ability to secure loans, housing, and even influence insurance premiums.
  4. Increased Costs: Defaulting triggers higher fees and interest rates, compounding the debt owed and potentially doubling the original amount in a short period.

Steps to Take if Struggling with MCA Payments

  • Communicate Early with the Provider: Reach out to your MCA provider at the first sign of financial trouble to discuss possible adjustments to your payment plan or other alternatives.
  • Seek Legal Advice: A business attorney can help negotiate with the MCA provider, address harassment, and provide guidance if legal action is taken against you.
  • Consider Debt Consolidation or Settlement: These options may offer a way out by either combining debts into a single loan with lower payments or negotiating to settle for less than the full amount owed.
  • Explore Tax Relief Options: If your MCA default leads to tax debts, options like “Currently Not Collectible” status or an Offer in Compromise with the IRS may provide relief.
See also  Arizona MCA Defense Lawyers Business Debt Relief

Preventative Measures

Taking an MCA involves significant risks, so it’s crucial to realistically assess your ability to manage payments before entering an agreement. Building an emergency fund and having a contingency plan can help mitigate the risks associated with MCAs. If you’re currently struggling, proactive steps and seeking professional help can prevent catastrophic outcomes.

For those facing challenges with MCA payments, consulting with experienced attorneys like those at Delancey Street can offer valuable guidance and support in navigating through the complexities and potentially avoiding the severe consequences of defaulting on an MCA.

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