What happens if I stop paying my MCA?

Introduction to MCAs

Thinking about stopping payments on your Merchant Cash Advance (MCA)? What happens next might scare you—but it doesn’t have to break you. Let me help you understand, let me help you fight, let me help you win. MCAs are different from traditional loans—different because they’re sold as “receivables advances.” They’re different, but they’re dangerous too—because they can act like predatory loans. And if you stop paying, they’ll come for you—aggressively and repeatedly.

They come for your bank accounts, they come for your daily revenue, they come for your business. But you have options—real, legal options. Let’s talk about what happens if you stop paying your MCA—and how to defend yourself. I’ve worked for business owners, I’ve fought for business owners, I’ve saved business owners. And I can tell you—MCA lenders rely on fear, and they rely on your silence. But silence won’t save you—understanding your rights will.

Why You Need a Lawyer

MCAs often cross the line between an advance and a usurious loan.
A lawyer knows how to exploit that line—how to show a court that your MCA isn’t what it claims to be.
If you stop paying, MCA lenders will often try tactics—tactics that include daily ACH withdrawals, court action, and intimidation.
But intimidation isn’t legality. If the MCA contract is faulty, we can challenge it.
A lawyer helps show that your default isn’t failure—it’s survival.
The courts recognize the difference—when a business is trying to survive, and not simply evade its obligations.

Specific Strategies MCA Attorneys Use

So, let’s dive into the specific strategies that MCA attorneys use to challenge these contracts. Let’s dig deep into how we make these cases winnable—let’s dig into how we fight. Challenging the Contract Validity: Many MCA agreements are actually disguised loans. You read that right—what they call an “advance” is often a loan, and an illegal one at that.

In Kapitus Servicing, Inc. v. Suburban Waste, Judge Frank highlighted the issue of reconciliation provisions—or the lack thereof. Without a valid reconciliation, these contracts fall apart. That means if your MCA doesn’t have a clear process for adjusting payments based on your actual receivables, it might be treated like a loan. And if it’s a loan, it falls under state usury laws—usury laws that often make it illegal.

Reconciliation Clauses are supposed to adjust payments as your business ebbs and flows. If they’re missing or unclear, that’s when we step in—that’s when we argue that the lender’s contract is invalid. LG Funding, LLC v. United Senior Properties established three factors that differentiate a legitimate receivables purchase from a loan:

Reconciliation provisions.
Finite terms.
Recourse in bankruptcy.

Let’s break those down: If your MCA doesn’t have a proper reconciliation clause—if it doesn’t adapt to your business’s income—it’s not a receivables purchase. It’s just a dangerous loan. And if the agreement has a finite term—like demanding daily payments for a set number of days—that’s another sign. A true receivables purchase doesn’t put an end date on income flow.

Recourse in Bankruptcy

Recourse in Bankruptcy: If the MCA contract says they can come after you even if your business files for bankruptcy, then that’s recourse—and it’s an indicator that they aren’t purchasing future income. They’re loaning you money. In New York, contracts that include personal guarantees tied to bankruptcy are viewed as loans—and loans must follow General Obligations Law. Many MCAs violate this.

We use these legal arguments—showing the lender’s failure to treat the agreement like a true receivables purchase—to protect you, to protect your assets, and to protect your future.

Partial Wins Matter

Partial Wins Matter: Winning against an MCA doesn’t always mean you’re free of all payments—but even partial wins matter. And let me tell you why. Courts have often ruled that summary judgment is about finding issues, not deciding them. Assaf v. Ropog Cab Corp. made this clear, and it buys you time—time to breathe, time to strategize.

Partial wins come in many forms—sometimes it’s a reduction in what you owe, sometimes it’s restructuring your payment terms. But every dollar saved, and every delay granted, is a victory. Davis v. Richmond Capital showed that fixed payments, rather than a true percentage of sales, can indicate a disguised loan. Many MCAs require daily, unchanging payments—payments that don’t account for your business’s ups and downs.

If your MCA demands fixed payments rather than a true percentage of your income, that’s a red flag. They say they’re buying your future income, but they act like they’re collecting a debt. This is crucial because usury laws limit how much interest can be charged. If the MCA acts like a loan, it can be challenged under these laws. Let me give you an example—California caps interest on loans to 10% if the lender isn’t licensed.

State-Specific Usury Laws

In Florida, any agreement with an effective rate above 18% is subject to scrutiny. MCAs often exceed these limits—giving us grounds to challenge them. Debt Relief is Possible: Now, let’s talk about why you might get debt relief. MCA contracts are often deeply flawed—and flawed contracts mean opportunities for relief. The Uniform Commercial Code (UCC) governs secured transactions, like those in MCAs. If an MCA agreement doesn’t properly follow UCC Article 9—regarding security interests—that’s a vulnerability.

Bankruptcy as a Defense

Bankruptcy as a Defense: If the MCA contract includes terms about coming after you post-bankruptcy, we argue that’s recourse—which makes it a loan. And loans can be voided if they breach consumer protection laws. Risk of Non-Payment: True MCAs include risk—the lender assumes risk if your receivables dry up. But many agreements? They act as if payment is guaranteed, and that’s where we fight. Without true risk-sharing, an MCA is in murky waters—legally speaking. That’s where our arguments begin, and often where lenders’ arguments fall apart.

Let’s revisit Rule 408 of the Federal Rules of Evidence. Statements made during settlement negotiations can’t always be used against you in court. We remind lenders of this—constantly.

Personal Stories Matter

Personal Stories Matter: I had a client—let’s call him Joe. Joe had a $120,000 MCA that demanded fixed daily payments. His income dropped, but the MCA didn’t care. We argued it was a loan—and got it cut to $60,000. Another client, Mary, faced three MCA defaults. We used their lack of a proper reconciliation clause to renegotiate—ultimately saving her $50,000. Partial wins? They kept her business open.

What an MCA Attorney Does to Win: We challenge fixed payment terms. We expose lenders’ failure to reconcile payments. We negotiate relentlessly until we find a way—a way to save you something. Texas Usury Caps: If an MCA acts as a loan in Texas, it’s subject to a 10% cap. That’s an opening for us—a big one if your MCA exceeds those limits. Virginia’s Usury Law also helps us argue against excessive rates. MCAs that act as loans cannot dodge state-specific caps—and your attorney knows how to bring that up.

You see, it’s not just about what’s in the MCA agreement—but what’s missing. No reconciliation? No risk-sharing? These are the flaws we leverage—again and again.

Challenging Personal Guarantees

Challenging Personal Guarantees: They want you personally liable, they want you personally tied to your business debt. But a true receivables purchase wouldn’t include this clause. It’s another point for us. I’ve seen it all—predatory tactics, harassing calls, ACH withdrawals without notice. But I’ve also seen the power of a solid legal defense—and I’ve seen MCA agreements fall apart.

New York State Laws require financial contracts to be written clearly, transparently, and fairly. MCA agreements often fail at least one of these. And that gives us leverage. A Fixed Payment Schedule is a red flag. It shows that the lender isn’t actually buying future income—they’re expecting certain, fixed returns. That’s a loan in disguise.

Partial wins matter because every saved dollar counts. Partial wins matter because every additional month to pay matters. Partial wins matter because keeping your business alive matters. If you’re struggling with an MCA default, remember:

You’re not alone.
You’re not powerless.
You’re not without options. This fight isn’t over, and you still have moves to make.

Your MCA is Vulnerable

If your lender failed to share risk, if your lender demanded fixed payments, if your lender pursued personal guarantees—then your MCA is vulnerable. When you hire an attorney who knows these contracts, you hire someone who knows every flaw that makes them illegal—and every flaw that makes them beatable. The goal isn’t just to avoid payment—the goal is to find a way forward. The goal is to protect your business, to protect your future, and to protect your ability to continue growing. I’ve saved businesses from being destroyed by MCA lenders. I’ve seen contracts that seemed unbreakable crumble. I’ve seen courts side with small businesses. It starts with knowing your rights.

Call to Action

If you’re facing an MCA default—call me at Delancey Street, 212-210-1851. There is a path forward, and I’ll help you find it. No promises, no miracles—but a fighting chance.