Merchant cash advance legal issues plague many businesses today. Sadly, individuals who signed a confession of judgment or COJ find it jeopardizes their entire livelihood. This document states the defendant accepts any agreed-upon liability and damages and is used to bypass standard court proceedings to resolve a dispute. Business owners who signed a cognovit note when entering the agreement might not realize they signed a confession of judgment. Although the terms of the COJ vary by jurisdiction, every business owner of this type needs to be concerned if they default on the agreement. Any business owner who signed a COJ and is at risk of a default on an MCA needs to consult with a merchant cash advance attorney right away.

The Confession of Judgment

A Confession of Judgment consists of a written agreement that the defendant signs. This document states the business owner accepts any liability and amount of damages agreed upon in the document and is required in many cases when the owner makes use of merchant cash advance services. Providers offering these services require the agreement as they wish to avoid a court battle if the business owner defaults. They don’t want to become embroiled in a lengthy legal process to recoup their funds. The agreement states the defendant forfeits their rights to dispute the provider’s claim in the future.

A Cognovit Note

Business owners must understand a cognovit note functions just as a confession of judgment does. This note outlines the amount owed by the defendant and states the business owner has voluntarily subjected themselves to court authority if a dispute arises. 

​​Defaulting on a Merchant Cash Advance

What happens when you default on a merchant cash advance? Rather than turning the business owner over to merchant cash advance collections, the MCA provider presents the confession of judgment or cognovit note to the court. The provider then gets a judgment without the debtor being aware the court proceeding took place. As a result, the defendant fails to receive the ability to present a defense.

The Dangers of a Default on a Merchant Cash Advance Agreement

Unlike with most small business loans or unsecured business loans, many merchant cash advance services providers require the business owner to sign a document that puts their personal assets at risk along with those of the business. After an MCA default, a person might find their home and personal assets disappear along with those that belonged to the business.

Help is Available

Any business owner in need of merchant cash advance relief should speak with us immediately. Our skilled merchant cash advance attorneys work to get the terms of the original agreement changed, so the business owner does not default. MCA providers, under law, must modify an agreement if asked, and the original agreement might offer other means of relief the business owner is unaware of. Our legal team works to find the best solution for the defendant’s specific situation, one that will allow them to keep the business, repay the funds, and move forward on solid financial ground. Contact us today for help. You worked too hard to build your business and shouldn’t let a difficult situation bring it down. Let us fight to protect your rights and ensure this does not happen.