MCA Default Lawsuits: What Business Owners Should Know

Can an MCA Company Sue Your Business?

An MCA provider may file a lawsuit if they believe the agreement has been breached and choose to pursue legal remedies. Whether and when they do so depends on the provider, the agreement, the amount at issue, and the creditor’s approach. A lawsuit is not an automatic consequence of a default — it is a decision the creditor makes based on its assessment of the situation.

Some MCA providers may pursue legal action more quickly than others. Some may attempt collection activity or negotiation first. The specific approach depends on the provider’s internal policies, the terms of the agreement, and the circumstances of the default.

What a Lawsuit Is — and Is Not

A lawsuit is a formal legal action filed in a court. It begins when the creditor files a complaint and serves the defendant with a summons. The summons and complaint notify the defendant that a legal action has been initiated and typically include a deadline for responding.

A lawsuit is distinct from a default notice. A default notice is a creditor communication — it is not filed in a court and does not carry the legal weight of a lawsuit. A lawsuit is also not yet a judgment. A judgment is a court order that may result from a lawsuit if the creditor prevails or if the defendant fails to respond.

How a Lawsuit Differs From a Default Notice

Understanding the distinction between a default notice and a lawsuit is critical:

• ›A default notice is a creditor communication. A lawsuit is a court filing.
• ›A default notice does not create a judgment. A lawsuit may lead to a judgment if the creditor prevails.
• ›A default notice does not have a response deadline in court. A lawsuit typically requires a response within a specific period.
• ›A default notice may be addressed through resolution strategies. A lawsuit may require legal counsel.
• ›A default notice does not trigger post-judgment remedies. A lawsuit, if it results in a judgment, may.

What May Happen After a Lawsuit Is Filed

If a lawsuit has been filed, several things may happen depending on the circumstances and jurisdiction:

• ›The defendant may be required to file a response (an answer) within a specific deadline, often 20 to 30 days.
• ›If the defendant does not respond, a default judgment may be entered against them.
• ›The case may proceed through discovery, motions, and potentially a trial.
• ›The creditor may seek a judgment, which may enable post-judgment remedies such as levies or garnishments under applicable law.
• ›The parties may reach a settlement at any point during the process.

Confession of Judgment and MCA Lawsuits

Some MCA agreements include a confession of judgment provision. Where included and enforceable, a confession of judgment may allow a creditor to potentially enter judgment without the usual lawsuit process, depending on applicable law and jurisdiction. Confessions of judgment are treated differently across jurisdictions — in some states, they are restricted or may be unenforceable in certain circumstances.

If your agreement includes a confession of judgment provision and you are concerned about its potential effect, consulting qualified legal counsel may be appropriate. The enforceability of such a provision depends on the specific language, the jurisdiction, and applicable law.

What to Do If You Have Been Sued

If you have been served with a summons and complaint, you should consider consulting qualified legal counsel promptly. There may be deadlines for responding that, if missed, could result in a default judgment being entered against you. An attorney licensed in your jurisdiction can advise you on your rights, obligations, and available options.

MCA Default and MYMCAOPTIONS LLC are not law firms and do not provide legal advice. This page provides educational information only. Do not ignore legal documents or deadlines.

Resolution Strategies and Lawsuits

Resolution strategies such as restructuring or settlement may be worth evaluating even after a lawsuit has been filed, but they do not automatically stop the lawsuit. The creditor may agree to pause or dismiss the lawsuit as part of a negotiated resolution, but this is not guaranteed. If a lawsuit is pending, any resolution strategy should be evaluated in consultation with qualified legal counsel who can advise on the legal implications.