The MCA Does Not Disappear When Your Business Closes
Closing your business does not eliminate the MCA obligation. The funder has a contract, UCC lien, and almost certainly a personal guarantee. When the business closes, the funder loses its primary repayment source and turns to secondary sources: the personal guarantee, remaining business assets, and legal action against you individually.
What the Funder Will Do
When the funder learns the business is closing, they will demand immediate full payment, enforce the personal guarantee pursuing you for the full amount, enforce the UCC lien against remaining business assets, file a lawsuit or confession of judgment, and aggressively pursue collection since the closing eliminates any prospect of ongoing payments.
Your Options
- Negotiate a settlement. Even after closing, settlements are possible. The funder knows a personal guarantee is only as good as your personal assets. If those are limited, they may accept a reduced amount.
- File bankruptcy. Personal bankruptcy may discharge the obligation including the personal guarantee. Chapter 7 or Chapter 13 depending on your situation.
- Challenge the contract. Recharacterization, fraud, and unconscionability defenses remain viable for closed businesses.
Winding Down Strategically
If you know the business will close, plan with an attorney. The order of operations for closing, liquidating assets, and addressing creditors matters legally. Improper asset transfers can be challenged as fraudulent conveyances. Priority of payment is governed by law. Personal guarantee exposure can sometimes be negotiated or discharged as part of a structured wind-down rather than left as open-ended personal liability.