16 Dec Court Rejects MCA Claims in Subchapter V | Dal Lago Law
Based on the opinion in In re IVF Orlando, Inc., 2025 Bankr. LEXIS 2573 (Bankr. M.D. Fla. Oct. 3, 2025).
Merchant cash advances (MCAs) continue to market themselves as “purchases of future receivables,” but courts are increasingly seeing through the label. A recent bankruptcy decision, In re IVF Orlando, Inc., provides powerful support for small business debtors seeking to restructure MCA obligations under Subchapter V. The ruling makes clear: MCA funders do not automatically own a company’s future receivables, and their claims are often unsecured.
Below is a breakdown of the case and why it matters to struggling business owners.
Background: IVF Orlando and the MCA Agreements
IVF Orlando, a fertility clinic, entered into two MCA agreements weeks before filing for Subchapter V bankruptcy. Fox Funding Group and Overton Funding claimed they had purchased the clinic’s “future receivables” and therefore owned the post-petition revenue generated from medical services.
Both funders filed objections to plan confirmation, arguing:
- The MCA contracts were true sales, leaving the debtor with no interest in future receivables; or
- They were secured creditors entitled to full repayment.
IVF Orlando’s plan treated the MCA funders as unsecured because a senior secured lender, FNB Community Bank, already held a perfected blanket lien on all business assets.
Key Issue: Can an MCA Fund Actually “Own” Future Receivables?
The court ruled no — and for an important legal reason.
A business cannot sell receivables that do not yet exist.
Future receivables from services not yet performed are merely an expectancy. Under the nemo dat principle — “one cannot give what one does not have” — a debtor cannot transfer ownership of property that does not yet exist.
Because IVF Orlando had:
- not yet performed the services,
- not billed clients, and
- no legally enforceable right to payment,
- the so-called “future receivables” were not property capable of being sold.
The MCA funders’ ownership argument therefore failed.
Post-Petition Receivables Belong to the Debtor — Not MCA Funders
The Bankruptcy Code further supported the debtor’s position. Under § 541(a)(7), receivables earned after the bankruptcy filing become property of the estate.
In addition:
§ 552(a) prevents prepetition liens from attaching to post-petition revenue.
Because IVF Orlando is a service provider, its post-petition receivables were not proceeds of prepetition assets. That meant:
- MCA funders had no valid security interest, and
- their claims were fully unsecured.
The Court Also Found the MCA Agreements Were Loans, Not Sales
Even if the receivables had existed, the court held the MCAs were not true sales. Instead, they were disguised loans, based on factors such as:
- personal guarantees
- acceleration clauses
- recourse and injunction rights
- daily ACH withdrawals
- security interests in all accounts
- indefinite contract terms
These features showed that the MCA funders did not assume the risk of non-payment, which is essential in a true receivables-purchase transaction.
When the risk stays with the business — not the funder — the arrangement is a loan, not a sale.
Outcome: Plan Confirmed, MCA Objections Overruled
The court overruled all MCA objections and confirmed the Subchapter V plan. The decision supports a growing trend: courts will not allow MCA funders to control a debtor’s post-petition revenue stream or block reorganization based on overreaching contract language.
Why This Case Matters for Businesses Facing MCA Pressure
✔ MCA funders often do notown your receivables.
✔ Their liens frequently fail to attach in bankruptcy.
✔ Most MCA contracts are legally loans — and may be challenged.
✔ Subchapter V offers powerful tools to restructure MCA debt.
If your business is struggling under MCA obligations, this case is a strong example of how bankruptcy courts can provide relief and restore control over essential operating revenue.