The sheriff or a process server handed you papers. The summons gives you twenty to thirty days to respond, depending on the state. Missing that deadline means default judgment. Default judgment means everything the funder threatened becomes enforceable immediately. The next seventy-two hours decide the next twelve months.
Hour Zero: Do Not Panic, Do Not Ignore
Being sued is not the worst-case scenario. Being sued and ignoring the engagement is the worst-case scenario. The lawsuit itself opens settlement options that did not exist pre-suit. Funders who file lawsuits often settle on the courthouse steps because they want resolution, not litigation. The engagement is now a negotiation with a deadline.
Read the summons carefully. Note the response deadline. The deadline is not negotiable, and missing it forfeits defenses you may have.
The First Seventy-Two Hours
Three things have to happen in the first three days:
- Get the file into the hands of an independent attorney who handles MCA litigation. Not a general business attorney, an attorney with specific MCA defense experience.
- Pull every MCA-related document: the original contract, statements, communications, ACH records, your business financials from the period of default.
- Engage a senior advisor to run the parallel settlement track while the attorney handles the litigation track.
The two tracks must be coordinated. An independent attorney handling defense without coordination with the settlement negotiator can undermine settlement leverage. A negotiator working without legal coverage can make admissions that hurt the defense.
The Independent Attorney’s Job
Independent counsel from a vetted referral network handles the court work: filing the answer, asserting affirmative defenses, motion practice, and discovery. MCA defenses that actually have legs include:
- Usury: arguing the MCA is a disguised loan with an interest rate above the state’s usury cap
- Unconscionability: contract terms so one-sided as to be unenforceable
- Lack of true sale: the MCA does not meet the legal requirements of a receivables purchase
- Improper COJ execution where applicable
- Accounting challenges to the stated balance
- Breach of the funder’s reconciliation obligations
- Choice of law and venue challenges
Not every defense applies to every engagement. The attorney’s job is to identify which defenses fit the specific contract and facts, file them within the answer deadline, and use them as leverage.
The Senior Advisor’s Job
While the litigation track moves, the senior advisor opens a parallel settlement channel. The conversation is not adversarial in the same way the legal track is. The advisor builds a financial picture that supports a settlement at a specific number, presents it to the funder’s settlement team, and negotiates against the funder’s portfolio incentives.
Funders almost always have a settlement team separate from the litigation team. The litigation team wants to win. The settlement team wants to resolve. The advisor knows how to find the settlement team and what numbers move them.
What Realistic Settlement Looks Like
Settlement of a litigated MCA typically runs:
- Pre-answer settlement: forty to fifty-five cents on the dollar
- Post-answer, pre-discovery: thirty-five to fifty cents
- Mid-discovery with strong defenses: twenty-five to forty cents
- On the eve of trial: ten to thirty cents in some cases
The number depends on the strength of the defenses, the funder’s portfolio position, the borrower’s documented ability to pay, and the leverage created by motion practice. A motion to dismiss on usury grounds, even if it does not succeed, can shift settlement numbers significantly because the funder fears a bad ruling that affects other files.
What You Do Tomorrow
Set up a call with a senior advisor. Bring the complaint, all MCA contracts, and the last twelve months of business financials. Within forty-eight hours of that call, you should have an independent attorney engaged for defense and a clear settlement strategy in motion.
Things to avoid in the next week:
- Calling the funder directly to discuss the engagement
- Signing anything new from the funder
- Making partial payments under pressure
- Transferring business assets to relatives or new entities
- Ignoring follow-up filings or subpoenas
Most MCA lawsuits do not go to trial. They settle. The question is the number. The borrower who shows up with no defenses, no financial documentation, and no advisor settles at seventy cents. The borrower who shows up coordinated and prepared often settles at thirty-five.
The Bottom Line
Being sued feels terminal. It is not. It is a negotiation with a deadline and a courthouse. Coordinate the legal defense with the financial negotiation, move within the first seventy-two hours, and you can usually emerge with a settlement that is survivable and a business that continues to operate.
Delancey Street is a business debt-relief company, not a law firm. When a matter requires legal work, we refer you to an independent attorney from our referral network; the attorney–client relationship is between you and that attorney.
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