Chicago MCA Defense Lawyers
Understanding Merchant Cash Advances (MCAs)
The first thing you need to know about Merchant Cash Advances (MCAs) is they’re not loans. They’re sales agreements, but guess what? That doesn’t mean you can’t fight back when the terms feel unbearable. MCAs often trap small businesses in endless cycles of debt. The reason? They siphon off your future receivables, cutting into your cash flow and making it hard to keep your head above water. In Illinois, MCA contracts are legal but tricky. They allow MCA funders to take a percentage of your revenue. But, if you’re struggling, you may be able to pause or restructure those payments. Let’s dive into some defenses.
Legal Strategies for MCA Defense Lawyers
One key strategy MCA defense lawyers in Chicago use is challenging the contract itself. If the contract isn’t clear or if there’s fraud involved, courts might rule that the agreement is unenforceable. Sounds like a win? Yes, but it’s not always that simple. Illinois courts have historically upheld MCAs as legitimate—so long as they’re carefully worded. MCA defense lawyers must comb through these agreements, looking for any legal missteps or inconsistencies. Remember, MCA agreements can sometimes be classified as loans, which would trigger usury laws in Illinois. Did the funder charge an excessively high rate? If yes, that could make the contract voidable under state law.
Precedents and Court Cases
For example, in Gordon v. Lincoln Park Trust, an Illinois court ruled that funders couldn’t enforce terms that effectively amounted to a high-interest loan disguised as an MCA. This case shows that MCA terms must pass scrutiny. If your MCA company sues you, that’s not the end of the road. A good MCA defense lawyer will contest the confession of judgment—especially if it was signed under questionable circumstances. Illinois, like New York, has seen many cases of Confessions of Judgment (COJs). However, Chicago attorneys will argue that these judgments can’t be enforced without proper service or notice.
Fighting UCC Liens
MCA funders love UCC liens—they can file these liens to freeze your assets. Chicago MCA lawyers will work to release those liens by negotiating new terms or fighting the underlying claims. UCC liens can cripple your business by freezing receivables and halting your cash flow. Illinois attorneys have methods to challenge these liens, especially if they are improperly filed. Another angle? Breach of contract claims. If the MCA funder didn’t stick to their side of the bargain, a Chicago MCA lawyer will argue for reduced payments or a total release from the agreement.
Fraudulent Inducement and Misrepresentation
In Illinois, MCA providers are obligated to follow the state’s fraudulent inducement laws. If you were misled by your MCA provider about the terms of the agreement, there’s a path to challenge the contract. Here’s a quick fact: MCAs are often regulated by the Uniform Commercial Code (UCC), which applies in Illinois. The UCC governs the sale of receivables, and if funders violate it, the contract can be challenged. Chicago MCA defense lawyers regularly use usury law as a defense. They argue that if the MCA is disguised as a loan and exceeds Illinois’ legal interest rate, the funder may have violated usury laws.
Leveraging Legal Precedents for MCA Defense
In cases like Broadway 51st Street LLC v. 125th Realty LLC, courts ruled against MCA funders that manipulated repayment terms to act like loans. Your lawyer will aim for this type of argument. Confessions of judgment have been heavily debated, especially with Illinois law requiring proper notice. Defense lawyers will argue improper service to get them thrown out of court. Another strong defense? Argue the contract was unconscionable. That’s legal speak for “ridiculously unfair.” If your MCA agreement was too one-sided, Illinois courts might throw it out.
The Role of Forensic Contract Review
You might be thinking, “But, the contract is signed—how can I get out of it?” That’s where a forensic contract review comes in. Chicago MCA attorneys will scour every line for violations. Illinois MCA cases often hinge on technicalities. If your MCA funder failed to disclose essential information or misrepresented key facts, your defense attorney can fight the validity of the agreement. If your cash flow is being drained by MCA payments, a Chicago MCA lawyer can negotiate for a pause in repayments—especially if your revenue has dropped since signing the agreement.
Using Arbitration to Resolve MCA Disputes
Fact: Illinois courts allow MCA disputes to be arbitrated. That means your lawyer might push for arbitration to resolve the case more favorably, avoiding a drawn-out lawsuit. MCA funders often stack advances, causing businesses to spiral into deeper debt. If you have multiple MCAs, Chicago MCA lawyers can consolidate them into a single, manageable repayment. A lesser-known fact is that MCA contracts may violate Illinois’ Consumer Fraud and Deceptive Business Practices Act. Your lawyer can argue that your funder acted unfairly or deceptively.
How Negotiation Can Lead to Debt Reduction
Chicago MCA defense attorneys are highly skilled in negotiation, often getting funders to accept less than the total amount owed. You could walk away with a significant reduction in debt. But, how do they win? They attack the legal basis of the contract, using both Illinois common law and state statutes. This approach often forces funders to reconsider and settle. When COJs are involved, Illinois lawyers argue lack of notice as a key defense. If you weren’t notified of the COJ, the court may vacate it, nullifying the judgment against you.
Bankruptcy as a Last Resort
What happens if your business is already failing? MCA attorneys can stall collection efforts to give you time to restructure or sell your business without harassment from funders. If bankruptcy is on the table, MCA lawyers will work with you to determine whether Chapter 11 or Chapter 7 is your best option. But, bankruptcy isn’t always necessary! Finally, Chicago MCA defense lawyers aim for partial wins, even if they can’t void the contract entirely. A lower payment or extended repayment term might be the outcome you need.