Indianapolis Merchant Cash Advance Legal Help – Attorneys, Debt Settlement
Merchant cash advances can seem like easy money for small business owners, but they often come with predatory terms and sky-high interest rates that can quickly spiral out of control. If you’re an Indianapolis business owner struggling under the weight of merchant cash advance debt, don’t panic – help is available. In this article, we’ll walk through your legal options for settling or eliminating your merchant cash advance debt with the help of an experienced attorney.
The Trouble with Merchant Cash Advances
A merchant cash advance (MCA) provides a lump sum of capital to a business in exchange for a percentage of future credit card sales. Because MCAs aren’t technically loans, lenders can skirt consumer protection laws and charge outrageously high effective interest rates often exceeding 100-200% APR or more.The typical MCA agreement requires daily or weekly repayments until the balance is repaid in full, which can take months or even years. Miss a few payments, and massive penalties kick in, rapidly inflating the amount owed. It’s a predatory cycle that’s nearly impossible to escape – unless you know your legal rights.
MCA Debt Settlement, Consolidation & Elimination Options
If you’ve found yourself trapped in a cycle of endless repayments to multiple MCA lenders, take heart – you have options. An experienced Indianapolis debt relief attorney can help you:
- Negotiate settlements – Settle your balances for pennies on the dollar and move on with your business
- Consolidate into a loan – Convert MCA debt into more manageable loan terms
- Challenge contract terms – Fight to eliminate illegal or ambiguous contract clauses
- File bankruptcy – Wipe MCA debt clean and start fresh (in some cases)
- Assert lender liability claims – Sue predatory lenders for damages under state laws
The path that makes the most sense depends on your specific circumstances. Below we explore these debt relief options in more detail.
Negotiating MCA Debt Settlements
Hiring an attorney to negotiate debt settlements is typically the quickest and most cost-effective route to MCA debt relief. Through aggressive negotiation tactics, a skilled lawyer can often compel MCA lenders to settle outstanding balances for 20-50% of what’s owed.The key is leverage. MCA contracts often contain ambiguous or unenforceable terms that lawyers can exploit to bring lenders to the table. Common negotiation strategies include:
- Disputing the loan principal – Many MCA contracts make it impossible to determine the true loan principal or annualized interest rates. Attorneys can argue these terms are illegal under state lending laws.
- Challenging daily repayment requirements – Courts often find that daily repayment requirements are unjust and unenforceable. This leverage can compel settlements.
- Threatening lender liability lawsuits – Predatory lending practices may entitle business owners to monetary damages. The threat of litigation builds additional settlement leverage.
- Freezing repayments – Stopping payments applies financial pressure on lenders to settle balances at a discount rather than drag out legal action for years trying to collect.
- Filing bankruptcy – Bankruptcy stops collections cold and often convinces lenders to settle rather than face discharge of their debts in court.
Settlement terms typically involve signing a new agreement to repay the reduced balance over 12-48 months. This converts MCA debt into much more manageable loan payments.
Consolidating MCA Debt into a Business Loan
Debt consolidation involves rolling multiple MCA balances into a single term loan, usually with fixed monthly payments over 1-5 years. This stretches out steep daily or weekly MCA payments into something business owners can actually budget for.Consolidating into a business loan also allows paying off MCAs at lower interest rates. Where MCAs may charge 50-200%+ APR, a business loan can reduce that to 10-30% APR and save tens of thousands in interest charges.
Challenging Illegal MCA Contract Terms
Shady MCA lenders often include illegal or ambiguous terms in their agreements, which can provide grounds to invalidate or reform contracts under state laws. Common unenforceable provisions include:
- Excessively high interest rates – Interest exceeding state usury caps is illegal and uncollectible. An attorney can fight to apply the maximum legal rate.
- Overly broad confessions of judgement – These give lenders too much power to seize assets without due process. Courts often strike or narrow these clauses.
- Rights to unlimited personal guarantees – Lenders cannot simply help themselves to owners’ personal assets and incomes without limitation. Guarantees may be restricted.
- Onerous default interest rates – Penalty interest rates that radically inflate balances can potentially be challenged as unfair and unenforceable.
- Aggressive acceleration or “balloon” terms – Clauses imposing near-instant full repayment of gigantic inflated balances resulting from a few missed payments may be struck down.
Reforming or eliminating these kinds of predatory terms can provide immediate cash flow relief and also pave the way for more favorable debt settlements.
Qualifying MCA Debt for Bankruptcy Discharge
Given their hybrid loan/accounts receivable nature, the dischargeability of MCA debt in bankruptcy is a complex issue that often comes down to court interpretations of the particular contract terms. But more often than ever, judges are recognizing the realities behind MCA agreements: exorbitantly high interest rates, draconian default penalties, and aggressive repayment structures clearly intended to keep struggling businesses trapped in cycles of debt.As a result, courts today are much more inclined to treat MCAs as loans subject to discharge rather than accounts receivable arrangements. This is especially true where personal guarantees or confessions of judgement are involved – courts realize owners’ personal assets are on the line so these are disguised high-interest business loans in everything but name.The bottom line is for many companies struggling with MCA debt, bankruptcy is emerging as a viable option to eliminate these balances and get back to business with a clean slate. When combined with lender liability claims (below), bankruptcy can wipe the slate totally clean of past MCA debt while also scoring much-needed cash to rebuild your business.
Asserting Lender Liability Claims Against Predatory MCA Firms
If you’ve been victimized by patently unfair or fraudulent lending practices, you may have grounds to go on offense by asserting state law claims against your MCA lender for damages.Types of lender liability claims that businesses could potentially pursue include:
- Usury violations – Illegal interest rates entitle borrowers to recovery of all interest paid, plus additional statutory damages
- Unfair practices – Predatory lending tactics may violate consumer protection laws
- RICO violations – Class action racketeering lawsuits target systematically fraudulent lending schemes
- Fraud – Knowingly advancing money despite inability to repay could constitute fraud
- Breach of contract – Failing to abide by lawful contract terms opens lenders to damages
The threat of lender liability litigation builds powerful leverage with creditors and motivates them to agree to favorable settlements or loan restructurings. And in the most egregious cases, these claims present opportunities to not only eliminate unfair debts altogether, but also score much-needed cash judgments or settlements.
Finding the Right Attorney for MCA Debt Relief
Navigating the complex legal landscape around Merchant Cash Advances requires an attorney experienced with these specialized instruments. When selecting counsel, look for lawyers with proven experience helping businesses:
- Negotiate settlements of MCA balances
- Reform/invalidate onerous contract provisions
- Convert MCA debt into term loans
- Discharge MCA debt in bankruptcy
- Sue lenders for damages over unfair/fraudulent practices
Ideally your attorney should thoroughly understand both the legal and the practical business aspects of how merchant cash advances work. They should also be willing to represent you aggressively on a contingency fee basis, only collecting if debt relief is successfully achieved.With an experienced lawyer in your corner, it is possible to settle, discharge or even outright eliminate predatory MCA debt and move forward with your business. Don’t hesitate to schedule a consultation with a qualified attorney serving the Indianapolis area to discuss your options today. Help is out there!