How an MCA Defense Attorney Helps Houston, TX
5 Functions That Control Risk

A Houston business in MCA distress meets its most consequential new protection in a statute, not in a courtroom.

Texas closed 2025 with enacted commercial financing rules that rewrite confession practice and disclosure duties for covered deals. Steps taken, or not taken, in the first weeks decide whether counsel invokes those rules from the outset or reconstructs them after the funder has moved. The agreement still comes first.

Contract Review and Reconciliation Demands

A New York appellate opinion supplies the reference before the argument begins. In LG Funding, LLC v. United Senior Properties of Olathe, LLC, a New York court evaluated the substance of the transaction through reconciliation practice, finite term, and bankruptcy recourse. The LG Funding opinion on MCA substance does not bind a Texas court. No Texas decision recharacterizing an advance was located in the inspected sources. The factors still organize the first review.

Counsel tests the reconciliation clause against operating history: whether adjustment requests received answers, whether the demanded proof exceeded what the merchant could assemble, whether the clause functioned as relief or as decoration. Take two stacked advances with overlapping debit schedules as hypothetical, with neither funder aware of the other at signing. The merchant documents the revenue decline with bank records, invokes each clause in writing, and preserves every response.

Texas usury law sets a 10 percent default maximum where no other law provides otherwise, with interest aggregated under the actuarial method across the stated term, a detail that matters if fees are recharacterized as interest. The contract was signed in haste. The audit of its cost proceeds at deliberation speed.

Confession of Judgment After House Bill 700

Enacted Texas law now voids the device inside covered contracts. Effective September 1, 2025, Finance Code Chapter 398 requires specified cost, payment, security, and broker compensation disclosures for specific offers under $1 million, and Section 398.055 declares a covered contract containing a confession of judgment or similar provision void and unenforceable. The enrolled text of House Bill 700 is the instrument counsel reaches for before any other Texas authority, though counsel must assess coverage, timing, and remedies for each file.

Adopted rules add a debit restriction with teeth: automatic deposit account debits under the framework require a perfected first priority interest in all recipient accounts receivable, with accurate disclosures before agreement and extremely close attention to misleading statements, unauthorized debits, and undisclosed fees. Existing operators hold a registration transition to December 31, 2026, so registration alone proves nothing about any particular file. Internet providers serving Texas fall within scope even without a local office.

And older confessions require separate analysis, since the statute governs covered contracts prospectively and says nothing that vacates every prior judgment by itself. Counsel therefore asks, if we are being precise, not only what the paper says but when the paper was signed, which determines whether the voidness rule touches the file. Files with older confessions still negotiate under the disclosure duties.

Automatic Debits and Bank Posture

August heat in Houston makes every waiting room feel urgent, and funder correspondence exploits the mood with extremely short deadlines. The debits continue after revenue falls, and each morning the owner decides whether to feed the account that feeds the funder or to preserve cash for payroll. Most owners wait past the point where waiting helped. I understand the impulse.

The bank is not the court. Authorization and account changes belong to the depository relationship, while default and remedy belong to the contract, and no owner should describe an authorized debit as unauthorized in order to trigger a return. An owner contacts the bank about account classification and available process. The schedule was assembled in order to preserve the priority of the funder, and statements made to collectors become evidence against the business.

Collateral, Turnover, and Receivership

After default, a secured party may take possession of collateral and render equipment unusable on the debtor premises without judicial process, but only where it can be done without breaching the peace. The Texas self help repossession limit draws the boundary counsel polices when blanket lien threats arrive by phone. Perfection requires proof beyond a letterhead, and counsel tests the filing before conceding position. The lien may be valid. The balance it asserts may not be.

Judgment opens a second front. A Texas judgment creditor can seek turnover orders reaching nonexempt present or future property, application of property to the judgment, or appointment of a receiver to take possession, sell, and pay proceeds to the creditor. The Texas turnover and receivership statute is the creditor side tool debtors plan around after judgment. Exempt property cannot be turned over, which returns counsel to exemptions before the receiver is appointed.

Settlement Strategy, Records, and Fees

Settlement begins when the funder doubts full collection. Texas exemptions give that doubt its shape: itemized personal property shielded up to capped aggregate amounts, with current wages fully exempt outside those caps. The Texas personal property exemption statute frames what a judgment creditor can actually reach from a guarantor. The homestead shield runs broader still, exempting the residence from seizure for creditor claims outside a closed list of encumbrances. What the funder discloses, or withholds, about balances and fees sets the agenda. The objective is to ensure the record supports the number and to ensure no release is signed before its scope is mapped.

Deception law supplies the counterclaim where the pitch misled, under a long catalogue of unlawful acts enforceable by the state and by private suits. The Texas Deceptive Trade Practices statute matters where balances, authority, or settlement terms were misstated. A third party collector without the required $10,000 surety bond on file gives counsel a compliance question to open with.

Bring the executed agreement with every amendment, the payment history with bank records to match, every demand letter, and a written timeline of all contact with the funder. Simply state the facts of the debt load at intake, and resist the urge to explain the shortfall, even briefly. The intake call should review and analyze the reconciliation language before any settlement range is discussed.

Ask who will hold the file, what the engagement covers and excludes, how litigation changes fees, and what independent counsel does if a settlement company participates. Delancey Street is a debt relief company, not a law firm. It offers a free confidential initial review and coordinates with independently licensed counsel where legal work is required. Delancey Street information about its settlement services describes that option on its own terms.

Consultation is where that process gets a second reader. Files reviewed early cost less in every sense, though the comparison is experiential rather than measured. The statute changed the terrain. Counsel walks it with the file complete.