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The Brutal Truth About MCA Lenders Freezing Your Bank Account

You wake up, brew your morning coffee, ready to tackle the day – only to find your business bank account is frozen. No funds available. No ability to pay employees or vendors. Your livelihood, paralyzed.All because you missed a payment to that merchant cash advance (MCA) lender.Sounds like a nightmare, right? Well, for countless small business owners – it’s a harsh reality. MCA companies are ruthless when it comes to collecting on defaulted deals. And freezing your bank accounts is just the start.

The Merchant Cash Advance Debt Trap

You took an MCA because you needed capital fast. Maybe to cover payroll, buy inventory, or just stay afloat. The lender dangled upfront cash with minimal requirements – a dream for businesses rejected by banks.But those “minimal requirements” were a con. Hidden in the fine print? Confessions of judgment, personal guarantees, outrageous factor rates. You essentially pre-authorized the MCA company to freeze your assets if you missed even one payment.And with daily or weekly remittances deducted directly from your merchant account, it’s easy to fall behind when cash flow dips. Suddenly, that “alternative financing” has you drowning in debt.

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When the Debt Collectors Come Knocking

So, you missed an MCA payment. What’s next? Well, don’t expect a polite phone call. These lenders play dirty:

  • They file Confessions of Judgment, allowing them to IMMEDIATELY freeze your bank accounts – no court approval needed
  • They serve you with UCC liens, redirecting your receivables straight to their pockets
  • They contact your customers and vendors, damaging relationships you’ve spent years building
  • They pursue personal assets like your home or car if you signed a personal guarantee
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All while racking up interest, fees, and legal costs you’re on the hook for. It’s a vicious, unregulated cycle designed to bleed you dry.But you don’t have to take this abuse lying down. There are defenses against these predatory MCA contracts and collection tactics.

Taking the Fight to Them

Defaulting on an MCA is terrifying, no doubt. But a skilled MCA debt relief attorney can be your lifeline:

If You’re Sued: Never ignore that summons. Your lawyer can file an Answer and assert counterclaims like violations of usury laws or deceptive lending practices. This buys time to negotiate while avoiding a devastating default judgment.

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If Accounts Are Frozen: An experienced firm can fight to unfreeze accounts and remove liens through bankruptcy or aggressive settlement negotiation. Getting funds flowing again is critical.

If Facing Harassment: There are still laws regulating debt collection conduct. Your attorney can pursue sanctions against MCA companies deploying abusive tactics like incessant calls or contacting customers.The key? Acting quickly at the first sign of trouble. Once judgments, liens, and garnishments start, it’s an uphill battle. But with the right legal support, you can escape the MCA debt trap.

Shattering the Debt Cycle, Once and For All

Look, no merchant cash advance horror story is identical. Every business’s situation is unique. But the pattern is clear – MCA companies exploit legal loopholes to trap owners in cycles of debt.At Delancey Street, we’ve made it our mission to shatter those cycles through aggressive representation and innovative debt relief strategies. We understand the immense stress of fighting for your livelihood. Of lying awake at night, wondering how you’ll pay employees or keep the lights on.That’s why we take a wholeheartedly comprehensive approach. We analyze every angle, uncover every potential defense, and chart a path to solvency tailored specifically for you. No cookie-cutter solutions – just elite legal work and unwavering advocacy.Because you don’t deserve some corporate bully freezing your accounts over a missed payment. You deserve a fighter in your corner, every step of the way.

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Can MCA Lenders Freeze Your Bank Account? Here’s What You Need to Know

So, you took out a merchant cash advance (MCA) to get some quick funding for your business. But now, you‘re struggling to keep up with the daily or weekly repayments. You‘re worried the MCA company might take drastic action against you, like freezing your bank accounts.The short answer is: yes, MCA lenders can freeze your bank account if you default on your advance. But there’s more to it than that. Let’s dive into exactly how this works and what you can do to protect yourself and your business.

How MCAs Differ from Traditional Loans

First, it‘s important to understand that MCAs are not loans in the traditional sense. With a loan, you receive a lump sum of money upfront and pay it back over time with interest, typically in fixed monthly installments.In contrast, with an MCA, the funding company purchases a portion of your business‘s future credit card sales or receivables. You then repay the advance (plus fees) through daily or weekly debits from your bank account, based on a percentage of your sales.This distinction matters because it means MCAs are not subject to the same regulations as bank loans. MCA providers have a lot more leeway in their contracts and collection practices.

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What Happens When You Default on an MCA

Missing even a single payment on your MCA can trigger a default. And once you‘re in default, things can escalate quickly. The MCA company has several ways they can come after you:

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1. Confession of Judgment

Many MCA contracts contain a “confession of judgment” (COJ) clause buried in the fine print. If you signed a COJ, you’ve essentially admitted liability and agreed in advance that the funder can obtain a judgment against you without notice or a hearing.So if you default, the MCA provider can march into court with your signed confession and get a judgment for the full balance owed, completely bypassing the normal litigation process. They can then immediately use that judgment to freeze your bank accounts, seize assets, and more.

2. Lawsuit for Breach of Contract

If your MCA agreement doesn’t have a confession of judgment, the funder will need to sue you for breach of contract to obtain a judgment. You’ll be served with a summons and complaint and have a chance to respond and defend yourself in court.However, MCA lenders are notoriously aggressive in their litigation tactics. They often go for the jugular, seeking the maximum damages possible. And if you don’t respond to the lawsuit in time, they can obtain a default judgment against you.

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3. UCC Lien

When you took out the MCA, you also likely signed a security agreement giving the funder a UCC lien on your business assets, including your accounts receivable. This means if you default, the MCA company can send notices to your customers and credit card processors instructing them to send payments directly to the funder instead of to you.They can also use the UCC lien to seize money from your business bank accounts, sometimes without any warning. So you could wake up one day to find your accounts frozen and unable to make payroll or pay your bills.

The Aftermath of an MCA Judgment

Whether via confession of judgment or a lawsuit, once the MCA funder has a judgment against you, they have powerful tools to collect:

  • They can garnish your business bank accounts, cleaning out all available funds.
  • They can levy your accounts receivable, taking a chunk of your daily credit card sales.
  • They can seize and sell off valuable equipment and inventory.
  • They can even come after your personal assets if you signed a personal guarantee.

Needless to say, this can be devastating for a small business. It can quickly cut off your cash flow and make it impossible to keep operating. And the damage to your credit can haunt you for years to come.

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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