The obligation does not dissolve with the obligee. A merchant cash advance funder ceases operations, shutters its office, removes its website, and the merchant who had been remitting 15 percent of daily receivables every morning for nine months assumes the matter is concluded. It is not. The contractual apparatus survives the entity that constructed it, and in many cases that apparatus has already been transferred to a successor the merchant has never heard of, operating from an address the merchant has never seen, asserting rights the merchant cannot verify.
The Debt Migrates Before the Company Disappears
MCA agreements contain assignment provisions. Nearly all of them do. The funder reserves the right to sell, assign, or transfer the agreement and all rights thereunder to any third party without notice to or consent of the merchant. This language, buried in the final third of a document the merchant signed under temporal and financial duress on a Wednesday afternoon in a strip mall office, is the mechanism by which a defunct company's receivable portfolio becomes a living instrument in another company's hands.
The assignment may precede the dissolution by months. By the time the funder's telephone number returns a disconnected recording, the merchant's daily ACH debits have been rerouted to a new account, administered by a new servicer, pursuant to a purchase agreement the merchant was never shown. In 2025, more than 230 bankruptcy filings involved MCA debt, and in a significant portion of those cases, the entity pursuing the claim bore no resemblance to the entity that originated the advance.
And so the first question is not whether you still owe. The first question is to whom.
A UCC Lien Outlives Its Filer
When the funder originated your advance, it filed a UCC-1 financing statement with the secretary of state, perfecting a security interest in your business assets. That filing has a duration of five years. The dissolution of the filer does not terminate it. Between 2015 and 2022, MCA-related UCC filings increased by more than 300 percent, and many of those filings remain active against businesses whose funders no longer exist as operating entities.
The lien persists. The company does not. The merchant is encumbered by a claim that belongs to no one who can be reached by telephone.
This is the condition. A blanket lien against all business assets, filed by a company that has been administratively dissolved in the state of New York, assigned perhaps to a successor whose identity is recorded in a purchase agreement lodged with a court in a proceeding the merchant was never notified of, or perhaps assigned to no one at all, the portfolio simply abandoned when the principals moved on to the next venture. The merchant cannot obtain new financing. The merchant cannot sell the business. The merchant cannot refinance existing obligations. A piece of paper in Albany or Sacramento or Tallahassee prevents it.
The remedy is a UCC-3 termination statement. If the secured party has ceased to exist and no successor has perfected, the merchant may file a demand for termination under Section 9-513 of the Uniform Commercial Code. If no response is received within twenty days, the merchant may authorize the filing office to terminate the record. That is the statutory mechanism. In practice, locating the appropriate party to receive the demand, when the funder has dissolved, its principals have scattered, and its registered agent has resigned, requires a different kind of effort.
The Confession of Judgment May Still Be Sitting in a Drawer
Before New York amended CPLR Section 3218 in August 2019, MCA funders collected signed confessions of judgment as a matter of course. The merchant signed an affidavit authorizing the entry of judgment in a specified amount without notice, without hearing, without an opportunity to contest. The amendment prohibited the filing of such instruments against out-of-state defendants, but it did not retroactively void those already held by funders or their assignees. If your advance was originated before the statutory change, and if the funder or its successor retains the signed confession, the instrument remains a potential source of exposure.
The question one must ask is whether the confession has been filed. If the company went out of business without filing it, the document may reside in a box of records sold at the equivalent of a commercial estate sale, acquired by a debt purchaser whose business model is the enforcement of dormant instruments. If it has been filed and a judgment entered, that judgment must be vacated. The Yellowstone Capital settlement of January 2025, which produced a judgment exceeding $1.065 billion and the cancellation of $534 million in merchant obligations, resulted in the vacatur of hundreds of such judgments in Rockland County alone. But Yellowstone was an exceptional case, prosecuted by the Attorney General. The merchant whose funder simply dissolved, without regulatory intervention, confronts the problem without institutional assistance.
Determine Whether the Entity Was Legitimate
Some MCA companies that ceased operations were not, in the legal sense, legitimate commercial enterprises. The FTC's action against RCG Advances, formerly Richmond Capital Group, revealed an operation that charged effective interest rates bearing no rational relationship to the stated terms, made unauthorized withdrawals from merchants' accounts, and threatened physical violence against business owners who resisted collection. The company's principals were permanently banned from the industry. A $20.3 million judgment was entered against its controlling individual, Jonathan Braun.
If your funder operated in a similar fashion, the dissolution of the entity may constitute evidence favorable to your position. An agreement procured through deception is voidable. An agreement whose terms, when examined under the three-factor test established in LG Funding LLC v. United Senior Properties of Olathe LLC, reveal no genuine reconciliation provision, no authentic contingency, no actual assumption of risk by the funder, is not a purchase of future receivables. It is a loan. And if it is a loan bearing an effective annual rate of 350 or 500 or 820 percent, it is a criminally usurious one under New York law, where the threshold remains 25 percent per annum.
That recharacterization does not require the funder to be present in order to occur.
The Personal Guarantee Survives Everything
In March, the calls arrive from a number you do not recognize. The voice identifies a company whose name contains the word "capital" or "funding" or "solutions." The caller references an agreement you signed with a different entity eighteen months prior. The caller states that you are personally liable for the outstanding balance, that a judgment will be entered, that your personal bank accounts are at risk. The caller is, in all probability, referring to the personal guarantee.
The personal guarantee is a separate instrument from the MCA agreement itself. It survives the dissolution of the funder, the assignment of the portfolio, the bankruptcy of the originating entity. It is a promise by the individual, not the business, to perform the obligations of the business in the event of default. The successor to the MCA agreement inherits the right to enforce it. This is the instrument that follows the business owner home.
But the guarantee is not unlimited in its application. If the underlying agreement is recharacterized as a usurious loan, the guarantee attached to it shares the same infirmity. If the funder breached the agreement by failing to honor reconciliation requests, by withdrawing amounts in excess of the agreed percentage, by debiting after written revocation of ACH authorization, those breaches constitute defenses to enforcement of the guarantee. The guarantee is a promise to perform. It is not a promise to submit.
What the Merchant Should Do Now
The sequence is precise. Obtain a copy of the original agreement. Obtain a UCC search from the filing office in your state of incorporation and your state of principal operation. Identify whether the funder's UCC filing remains active. Determine whether the entity has been dissolved, merged, or acquired, and whether an assignment of the agreement has been recorded. Search the court records in the county where the confession of judgment would have been filed, which for out-of-state merchants was frequently Westchester, Rockland, or New York County. Determine whether a judgment has been entered against you or your business.
If a successor entity contacts you, demand proof of assignment under UCC Section 9-406. The successor must provide reasonable evidence that the original funder's rights have been validly transferred. Until that proof is furnished, you are under no obligation to remit payment to an entity whose authority you cannot confirm. Seventeen months ago, we addressed the question of how to negotiate a settlement on a merchant cash advance; the principles articulated there apply with equal force when the counterparty is a successor rather than the originator, though the successor's willingness to settle is often greater, having acquired the receivable at a discount.
No, the obligation does not simply vanish. That would be too symmetrical, too clean, too much like the resolution the merchant deserves after months of daily debits and quarterly anxieties. The obligation transforms. It changes hands. It may weaken. It may become unenforceable. But it does not announce its own status. The merchant must investigate, and the investigation requires a particular kind of attention, the kind that reads assignment clauses and examines UCC filings and understands the difference between a valid transfer and an opportunistic assertion of rights by a stranger.
We conduct that investigation with regularity. The merchant who calls after discovering that the funder has disappeared is not in the worst position. The merchant who calls after a successor has already filed suit is.