Welcome to Delancey Street. If you’re on this page, it’s because you’re contemplating hiring a MCA defense lawyer to help you. The objective of this article is to help you understand whether you need a Nebraska MCA defense attorney or not. If you’re behind on your MCA payments, your first step is likely to wonder – do I need an MCA attorney to help right now. Often, you’d be right. With MCA’s though – you have options. For example, you can try engaging with the lenders on your own. Another option you have is to hire a business debt settlement company like Delancey Street – to help you.
There are several characteristics of the merchant cash advance business which are unique. The distinction between a loan and a sale is legally (and colloquially) unclear. The purchase agreement is typically written as a sale of future sales from the business, not as a loan. The funder begins to withdraw funds from the business’s account daily (or weekly) until the funder receives a certain fixed amount. In the event of default by the merchant, the funder will sue the business and the business owner who signed the personal guaranty. If you are a business owner from Nebraska and you are asking the question in the title, the answer is “it depends”. The most important lawyer for the business owner (if the funder is suing in New York) is the lawyer who is admitted in New York. The most important lawyer for the business owner (if the judgment is in Nebraska or if the business owner plans to file bankruptcy) is the lawyer who is admitted in Nebraska.
Nebraska does not have a law to give anyone a disclosure of the cost of an advance before signing a contract. California, New York, Virginia, and Utah have laws that require funders to disclose the cost of an advance. The Nebraska Legislature amended the state’s consumer loan laws in 2026. The bill, Nebraska Legislative Bill 717 (LB 717) was signed into law by Governor Jim Pillen on February 25, 2026. The LB 717 law applies to consumer installment loans, not merchant cash advances. A Nebraska merchant cannot use a lack of disclosure as a defense. Nebraska usury law is not as strong as the legal marketing claims. Its Section 45-101.03 allows for 16% a year interest on most loans.
Its Section 45-101.04 exempts any loans to corporations, partnerships, LLCs, and trusts, and anyone who guaranteed such loans, from the 16% a year limit. The Nebraska Supreme Court ruled in Classen v. Becton, Dickinson Co. 1983 that a corporation can agree in writing to any rate. A Nebraska LLC that took an advance has no Nebraska usury defense even if the court finds that the advance was a loan.
For a sole proprietorship, there is an exception to the loan cap. It eliminates the loan cap if after July 18, 2026, a borrower is indebted to one financial institution, licensee, or permittee in an amount equal to or greater than $100,000. Prior to LB 717, the threshold was $25,000. A borrower’s successful usury defense in Nebraska is narrow. According to Section 45-105, the contract is valid, and the lender can only receive the amount of the principal, less any interest previously paid. The borrower has to plead usury or waive the right to do so.
A Sale or a Disguised Loan
At present, it is unclear whether a merchant cash advance is a sale or a disguised loan under the laws of the State of Nebraska. There is no published appellate level case in the State of Nebraska on this issue. The only decision even slightly close to this issue in the state of Nebraska is a decision in the bankruptcy court. In In re Cornerstone Tower Services, Inc., the bankruptcy court in the state of Nebraska avoided certain payments to LG Funding as preferences. The bankruptcy court found that the debt was not incurred in the ordinary course of business. The business only engaged in merchant cash advances for a few months before filing Chapter 11 bankruptcy on May 13, 2016.
New York Law
The case is mostly (but not all) about New York law. New York says that a corporation may not have the defense of ordinary usury, i.e. General Obligations Law Section 5-521. But a corporation may have the defense of criminal usury, i.e. interest in excess of 25% a year. In Adar Bays v. GeneSYS ID (2021), New York’s highest court found that a loan with criminal usury interest is wholly void. The test for what is, and is not, a loan is from the New York Second Department in LG Funding v. United Senior Properties of Olathe (2020). E.g. whether there is actually a reconciliation clause in the agreement, a fixed term, and funder recourse if the merchant files bankruptcy.
Direct Action Against Funders
The test was applied against funders in a federal court in New York. In Fleetwood Services v. Ram Capital Funding, a Texas business sued its funder in Manhattan federal court. In 2022, the court ruled the advance was a loan at almost 115% annual interest. Damages for the violation of the federal racketeering statute were awarded. On June 8, 2023, the decision was upheld by the Second Circuit Court of Appeals. Direct action against funders has been taken by regulators. On January 22, 2025, the New York Attorney General sought and obtained a $1.065 billion judgment against Yellowstone Capital and its affiliates. More than $534 million in merchant debt owed to Yellowstone by over 18,000 businesses nationwide was cancelled as part of the settlement. Yellowstone also agreed to abandon any unpaid judgments against merchants. Nebraska merchants that had financed through Yellowstone were part of the group nationwide.
A Filed Confession
It used to be a lot quicker and easier to get a judgment against a merchant in another state. All a funder had to do was go to a county clerk’s office in New York and file a signed confession to get a judgment without even having to sue. New York changed the rule on August 30, 2019 (CPLR 3218) to stop that from happening. Now a confession must be filed in the county in New York in which the defendant resides. A business resides where it has its place of business. So a business located in Nebraska which does not have a place of business in New York can’t get stuck with a filed confession.
There is a loophole in the 2019 amendment. In Express Trade the Appellate Division determined the amended CPLR 3218 only applies where a funder obtains judgment without filing a lawsuit. A funder can file a lawsuit in New York, and attach the signed confession to the lawsuit. There is also a confession statute in Nebraska. Section 25-1312 requires the attorney who issued the confession to file the written warrant of attorney and attach it to the court file. A confession against a corporation without the warrant has been void since Fogg v. Ellis (1901).
The forum clause sets the place for this opening battle. Most contracts specify the courts of the State of New York. The federal court in Nebraska is in Omaha, Lincoln and North Platte. Appeal is to the Eighth Circuit Court of Appeals. A lawyer licensed only in Nebraska cannot sign an answer to the New York case. If no answer is filed, then a default judgment will result.
Uniform Enforcement of Foreign Judgments Act
A judgment from New York is not self-executing as to a fund on deposit in a Nebraska bank. Under the “Uniform Enforcement of Foreign Judgments Act” under Nebraska law, the funder must register the judgment. A funder must file an authenticated copy of the judgment with a clerk of a court in Nebraska. A funder must also file an affidavit of both parties’ addresses. The court clerk must notify the merchant, under court rule 6-1507, within 10 days. After being filed, the judgment must have the same effect as a judgment of a court in Nebraska.
The Nebraska lawyer will get paid at the time the judgment is registered. The Nebraska Supreme Court held in 1999 in the case of Deuth v. Ratigan, that once the judgment is registered the judgment can be attacked for lack of jurisdiction. The Nebraska court will determine if there is jurisdiction. The Nebraska court will stay the judgment pursuant to Section 25-1587.05 of the Nebraska statutes if the appeal is pending in New York and the merchant posts the required bond. The motions are brought to the county where the judgment is registered through a Nebraska lawyer.
Once the judgment is registered, the funder attaches the bank pursuant to Sections 25-1001 to 25-1056. The funder files an affidavit and the clerk will issue a summons to the bank. The bank answers the written interrogatories. The clerk must mail a copy of everything to the merchant within five days of the bank answering. The judgment is dormant under Section 25-1515, if no execution is issued in five years. In the case of a foreign judgment, the five years runs from the date of registration in Nebraska.
Federal venue law points to the district where the debtor’s principal place of business or assets sat for most of the prior 180 days. The automatic stay that results from the filing means that the prior judgments are not enforceable; all collection activity must stop. Cornerstone Tower holds that the advance payments made within the 90 days preceding the filing can be recovered by the trustee.
- If you are involved in a lawsuit in NY, call a NY attorney to file an answer so a default is not entered.
- If a judgement has been registered in NE, or a bank account has been attached, call a NE attorney.
- If you are not involved in a lawsuit, and the stacked advances are emptying your account, call a settlement negotiator to restructure the debits.
- If the business cannot pay the advances, call a NE bankruptcy lawyer.
