What Happens to an MCA If I File Bankruptcy?
Filing bankruptcy triggers the automatic stay, which generally stops funders from collecting, including daily debits, while the case is open. What happens to the balance depends on the chapter you file and on whether the court treats the advance as a sale or a loan. Talk to a bankruptcy lawyer before you file, and tell them about every open advance and UCC filing.
What does the automatic stay do to an MCA?
Under 11 U.S.C. § 362, most collection has to stop once a case is filed. Funders that keep debiting can be ordered to return the money. Your lawyer notifies creditors, and you can also send the funder your case number.
Do the daily debits stop when you file?
They are supposed to. The stay bars most collection once the case is filed, including debits on a debt from before the filing. Debits sometimes keep running for a few days because the funder's system hasn't caught up, so your attorney sends notice of the filing to the funder right away.
Why does the contract's wording matter?
Courts have looked at whether an advance is really a purchase of sales. One factor is whether the funder can still collect if you file bankruptcy. See is an MCA a loan. The answer can change how the funder's claim is treated in the case.
What should you do before you file?
- List every advance with balance, payment and funder name.
- Find each UCC filing.
- Keep your bank statements for the last several months.
- Don't pay one funder ahead of others without advice.
What happens after the case ends?
Once the case closes, funders will see the filing on your credit and in court records. Plan on a waiting period and a smaller first advance.
What should you ask the funder?
- Does the contract say bankruptcy is a default?
- What UCC filings do you hold against the business?
- What's the balance as of today?
- Who should my lawyer contact?
Where can you check your own numbers?
The short version is in the Legal FAQ. To check the numbers on your own advance, use the stacked payment calculator.
Want a second look at your advance?
Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.