Options After an MCA Default

Overview of Resolution Options

Resolution strategies for MCA default generally fall into several categories. Each involves a different approach to addressing the outstanding obligation, and each has different requirements, limitations, and potential outcomes. Understanding the distinctions can help you evaluate which may be worth pursuing.

No resolution strategy is guaranteed. No creditor is obligated to negotiate, restructure, settle, or modify any obligation. The outcomes depend on the creditor’s willingness, the specific circumstances, and applicable law.

MCA Restructuring

Restructuring involves evaluating whether a different payment structure or workout may be available for an existing MCA obligation. This may include changing the payment frequency (for example, from daily to weekly), adjusting the payment amount, extending the term, or establishing a workout arrangement that differs from the original agreement.

Restructuring may be worth evaluating when a business is experiencing payment pressure but may be able to continue making payments under a modified structure. It does not eliminate the obligation — the obligation continues, but the terms may change. Whether restructuring is available depends on the provider’s willingness, the agreement’s provisions, and the business’s circumstances.

MCA Settlement

Settlement involves evaluating whether a creditor may be willing to accept a negotiated resolution of the outstanding obligation. This may involve a reduced payment, a structured resolution over time, or other terms that differ from the original agreement.

Settlement may be worth evaluating when a business cannot continue the current payment trajectory and a negotiated resolution may be appropriate. No creditor is obligated to negotiate, and no settlement outcome is guaranteed. Settlement does not automatically stop a lawsuit or remove a judgment.

Payment Modification

Payment modification involves changes to the payment frequency or amount under an existing obligation. It is a form of restructuring that focuses specifically on the payment terms rather than the overall structure of the obligation.

Payment modification may be available where the creditor is willing to adjust the payment schedule without fully restructuring the obligation. Whether it is available depends on the creditor’s willingness and the agreement’s provisions.

Qualified Buyout or Refinancing

Qualified buyout or refinancing may be an option for some businesses that can secure financing capable of actually replacing existing obligations. This means the new financing is used to satisfy or pay off the existing MCA obligations, so the old payments no longer apply.

Qualification is required, and not every business or default situation will qualify. It is important to distinguish true replacement — where old obligations are actually satisfied — from additional stacking, where old obligations remain and a new payment is added on top. Using new short-term financing to cover existing payments without actually replacing the original obligations can increase payment pressure.

What No Resolution Option Guarantees

It is important to be clear about what no resolution option can guarantee:

• ›No option guarantees that a creditor will negotiate, restructure, settle, or modify any obligation.
• ›No option guarantees a specific settlement percentage, payment reduction, or creditor response.
• ›No option automatically stops a lawsuit that has already been filed.
• ›No option automatically removes a judgment that has already been entered.
• ›No option automatically removes a UCC filing.
• ›No option prevents a creditor from pursuing legal remedies while negotiations are ongoing, unless the creditor agrees to pause.

When to Evaluate Resolution Options

Resolution options may be worth evaluating at various points in the process:

• ›When payments are becoming unaffordable but have not yet been missed.
• ›After a missed payment or returned ACH, before the situation escalates.
• ›After receiving a default notice, to evaluate whether a negotiated resolution may be possible.
• ›When multiple MCA positions are creating compounding pressure.
• ›Before taking another MCA to cover existing payments, to evaluate whether true replacement may be available.

Evaluating Which Option May Be Appropriate

The right approach depends on the specific circumstances, including the terms of each agreement, the business’s cash flow, the total payment burden, the number of active positions, and the creditor’s approach. In some cases, one strategy may be more appropriate than another. In others, a combination of strategies may be worth evaluating.

Understanding the full scope of your obligations — including the total number of positions, the aggregate payment burden, and the terms of each agreement — can help you identify which resolution strategies may be viable and in what combination.

If Legal Action Has Been Taken

If a lawsuit has been filed or a judgment has been entered, resolution strategies may still be worth evaluating, but they should be pursued in consultation with qualified legal counsel. Settlement does not automatically stop a lawsuit or remove a judgment. MCA Default and MYMCAOPTIONS LLC are not law firms and do not provide legal advice.