We're Delancey Street, a New York business debt relief firm. At our company, on a daily basis settle MCA and commercial debt for owners. We're not a law firm, and this is an important distinction. Many of our competitors blur the line, and they do so on purpose - we work with attorneys who litigate this stuff and we cover those costs when a file needs them. The goal of this article is to help you understand your options when dealing with MCA debt specifically, in Raleigh, and how our company can help.
What a Confession of Judgment Is and Why MCA Funders Use It
The MCA rep will sometimes drop the phrase "confession of judgment" - a COJ - and now you think the funder can empty your account tomorrow and there's nothing you can do. In plenty of states that fear is valid. In North Carolina the funder is bluffing a lot harder than they're letting on. Many states in the country have started regulating the COJ. For example, in NY - you can only use the COJ if the business owner is also based in NY. If you're located in Raleigh, and the lender is in NY - they cannot use the COJ against you. Even if you sign it, its not valid. Many people don't even know what the COJ is. A COJ is a clause buried in your agreement that lets the funder skip the lawsuit. If they have a valid COJ, then they can walk into a courthouse, almost always in New York, and get a judgment against you without you ever getting serve. This is not an exaggeration. You only find out about it when the account's frozen. That was the legal loophole that everyone in industry for years used, until Bloomberg's "Sign Here to Lose Everything" ripped the lid off.
Why Confessions of Judgment Are Weak in North Carolina
North Carolina Does Not Allow Confessions of Judgment
North Carolina doesn't permit COJs the way other states do. So when an out-of-state COJ judgment tries to get domesticated and enforced here, it hits friction NC owners don't get in other places.
New York Banned COJ Enforcement Against Out-of-State Borrowers
These COJs get filed in New York because the contract picks NY law. Many of the lenders are based out of NY, which became infamous for their allowance of the COJ. And New York banned COJ enforcement against out-of-state borrowers back in 2019. Your Raleigh business is out-of-state to a New York court. A COJ filed against you in NY after that change is, in a lot of cases, voidable.
Here's the part we see constantly - funders send the letter anyway, because the letter does the job on people who never find out the judgment behind it is shaky. The threat scares you, and you don't know what to do. You see a notice, or letter, and think it's valid - and because you don't know any better, and because Google is littered with scary articles about COJ's, you think it's valid and a warning of impending doom.
The North Carolina MCA Statute of Limitations Is Only Three Years
North Carolina's statute of limitations on a contract claim is three years under G.S. 1-52, this is one of the shortest clocks in the country. For contrast, Kentucky's is fifteen.
Does North Carolina's 8% Usury Cap Void Your MCA?
Every marketing page on the internet will say that North Carolina caps interest at 8% so your 200% MCA is automatically void.
But North Carolina also has a broad commercial exemption under § 24-9. Above the threshold, a business loan can legally carry a rate that would be flat illegal on a consumer. So even if you win the legal recharacterization fight and prove the MCA you took really is really a loan, the exemption might let the rate stand. It all depends on amount, structure, licensing. Anybody promising you the 8% kill shot on the first call hasn't opened your contract. In addition, one clause that really matters is the reconciliation clause in your agreement. Most MCA agreements have this clause, and the purpose is to allow you to lower your daily/weekly ACH - if your revenue goes down. Remember, an MCA is a purchase of your future revenue. They figure out your average revenue, and tell you they're taking a % of your daily revenue (5-15%). So that'll take shape, in them saying - they're taking $200 a day, etc. The issue is, if your revenue goes down, then that daily amount they're taking on a daily basis needs to go down too. But often, most MCA lenders don't automatically lower the ACH amount based on your revenue. And if you try to get them to lower it, via the reconciliation request - often they'll try to delay, and stall the request, or outright deny it.
How Raleigh Business Debt Settlement Actually Works
Don't panic-settle off a COJ notification. Don't keep wiring a daily debit on a balance that might already be three years stale. In practice when you've got a stack restructuring looks like - sort which funder is holding live enforceable paper versus which one's waving a defanged COJ and a time-barred claim, then you lean on the weak positions and sequence the payouts off whatever cash the shop still throws off. If you're struggling with MCA debt, the first thing you should do is speak to our team. Every single MCA lender is different, and has a personality. We understand how to work with each lender, how they operate, and come up with a unique strategy to fight against each MCA lender.