There is no law that says you need a lawyer to settle a MCA debt. A written release you sign should bind the parties. However, a lawyer will look at things you may not think about.
Is an MCA settlement binding if you sign it without a lawyer?
In most cases a MCA settlement is binding as long as it is in writing and signed by the parties. See New York General Obligations Law 15-303 (a written release of a debt is valid without consideration or a seal).
However, if there is a lawsuit pending against you or your company, any agreement about a matter in the action must be in a writing subscribed by the party or his attorney, or made in open court. See CPLR 2104. In that case your company will have to appear through an attorney. If you are sued, consider retaining an attorney rather than a MCA debt settlement company. See When do you need a lawyer and not a MCA Settlement Company.
What does a lawyer to settle merchant cash advance debt check in the agreement?
| Clause | What the fixed version says | Law behind it |
|---|
| Released parties | A mutual release, with "funder" defined to include affiliates, assignees and brokers, and every agreement number listed | NY GOL 15-105 |
| Guarantors | Each guarantor named as a releasee in an individual capacity, with the guaranty expressly released | NY GOL 15-105 |
| Confession of judgment | Unfiled affidavits returned or destroyed plus a covenant not to file; filed judgments satisfied by a stated deadline | CPLR 3218, 5020 |
| UCC filings | A UCC-3 termination for each filing by a set date, with written permission for you to file it if the funder doesn't | UCC 9-513, 9-625 |
| Pending lawsuit | Discontinued "with prejudice" | CPLR 3217 |
| Default terms | A cure period and no reinstatement of the original balance | The contract itself |
| ACH and bank holds | Debit authorization cancelled; restraining notices and levies released in writing | CPLR 5222 |
The above chart is not all-inclusive. A MCA company like Yellowstone Capital, sued by the New York Attorney General, did business through 25 subsidiaries. Leave one out of the release and it could sue you on a separate MCA advance. Also, in a mutual release you are releasing your own claims against the MCA company, such as usury. In a judgment against Yellowstone Capital, the Attorney General cancelled $534,552,724.00 in MCA debt. See Attorney General's Press Release.
Do I have to be included in the MCA debt settlement if I only signed as a guarantor?
Yes! You are considered a separate obligor of the debt and should be included in the release. Even if the MCA company releases the entity, it could still argue that you owe the debt under your guaranty. See NY General Obligations Law 15-105. Make sure that you are included in the release in your individual capacity, as are any other guarantors such as your spouse. Handle any confession of judgment you signed individually as outlined below. If the MCA company will only release the entity, consider your own attorney, since your interests may differ and the attorney on the file may only represent the entity.
What happens to the confession of judgment you signed?
First, is it already filed? If not, the settlement should require that they return or destroy the original affidavit and promise not to file it. In New York, for example, confessions of judgment can be filed for 3 years after they are signed, in the county where the debtor resided or transacted business. See CPLR 3218.
If it is already filed, they must file a satisfaction piece once the judgment is paid. CPLR 5020 requires the creditor to mail you a copy of it within 10 days of filing. If he doesn't do so within 20 days, he is subject to a $100 penalty (or $500 if the judgment was for $5,000 or more). It must be filed in every county where the judgment was docketed. If you pay less than the full amount, the agreement should say your payment constitutes satisfaction in full of the judgment.
Pennsylvania readers: if the deal falls through, you only have 30 days from the date you were served with notice to file a petition to strike or open a confession of judgment, and you must include all grounds in the same petition. See Pa.R.C.P. 2959. Pennsylvania still enforces confessions of judgment in commercial transactions, unlike Texas, which voided those provisions as of September 1, 2025. New York's bill (S2305), passed by the State Senate, is not yet law.
How do I make sure they remove the UCC lien?
The agreement should require removal by a specific date and name each UCC lien (state and file number). UCC Section 9-513 requires a termination statement within 20 days after an authenticated demand if nothing is owed, and 9-625(e) provides a $500 statutory damage remedy. But for a sale of accounts the duty is tied to account debtors paying, which is awkward in an MCA (technically a sale of receivables), so you are better off with a contractual remedy. A UCC filing otherwise stays effective for 5 years unless continued.
What happens if I miss one payment on the structured settlement?
It depends on the default provision, likely drafted in the funder's favor. Be wary of:
- reinstating the original balance if you are late on even one installment;
- a stipulated judgment for the full amount held in escrow.
Negotiate a reasonable cure period, and make the payments yourself rather than authorizing ACH debits.
Frequently Asked Questions
Will I get a 1099-C if I settle my MCA for less than I owe?
Maybe. Federal rules require an applicable entity with a significant trade or business of lending money to file a 1099-C if it forgives $600 or more, including by settling for less than owed. Whether a funder qualifies is unclear, especially if it claims to be purchasing your receivables rather than lending. Forgiven debt can be taxable income, although there are exceptions for debtors who are bankrupt or insolvent. Take the signed settlement agreement to your CPA.
Who is responsible for removing the bank restraint on my MCA?
The funder. The settlement agreement should say they will release the bank restraints in writing to each bank, with copies to you, by a certain date. A New York restraining notice lasts one year or until the judgment on which it was issued is satisfied or vacated. The bank will not lift it just because you say you settled.
Should my MCA settlement agreement include a provision dismissing any pending lawsuit "with prejudice"?
Yes, if there is a pending lawsuit. In New York a stipulation of discontinuance is without prejudice unless it states otherwise. See CPLR 3217(c). Otherwise the funder can refile the same lawsuit later.