Hire a law firm when you need someone to represent you in court or arbitration, to vacate a confession of judgment, or where you need the protection of the attorney-client privilege.
The choice between a debt settlement company and a law firm for your Merchant Cash Advance (“MCA”) comes down to what each is legally allowed to do, which the statutes limit in five areas. For a more fact-based method, see our guide to deciding whether you need a lawyer for your MCA debt, or compare the different methods of dealing with your MCA debt, including doing it yourself.
What can a law firm do for MCA debt that a settlement company can't?
A law firm can represent you in court, a debt settlement company cannot. New York requires a corporation to “appear by attorney” under CPLR 321(a). Federal courts apply the same rule to entities, and New York Judiciary Law 495 prohibits a corporation from practicing law or appearing as an attorney “in any court in this state or before any judicial body.”
So if the funder sues you, a debt settlement company cannot answer the lawsuit or file motions for you. In New York, you only have 20 days after being personally served to appear in the lawsuit. As the Supreme Court of Ohio noted, acting as a messenger to negotiate a business debt is legal, but using legal tactics or giving legal advice crosses the line. A settlement company’s only leverage is that settling is cheaper for the funder than litigating. A lawyer, on the other hand, can raise substantive legal defenses, such as the argument that your MCA is a disguised loan, which is how New York’s Appellate Division treated the MCAs in People v Richmond Capital Group in February of 2026, holding them usurious. Or a lawyer can file for bankruptcy under Subchapter V, which currently allows debts up to $3,424,000.
Finally, according to the New York State Attorney General, one service handling MCA arbitrations handled approximately 3,000 cases, and in 97% of them no business appeared.
Can a debt settlement company vacate a confession of judgment?
No. Vacating a confession of judgment is litigation, and in New York at least, courts treat a plenary action (a new lawsuit) as the way to vacate one that has been entered, which only a lawyer can bring for your company. (New York still allows a funder to file a confession of judgment, but only in the county of the debtor’s residence, under CPLR 3218.)
In Pennsylvania, you get one petition to strike or open the judgment within 30 days of being served with notice, and any defense you leave out is waived. See Pa.R.C.P. 2959. A debt settlement company can, however, negotiate with the funder not to file a confession of judgment, or, if it has already done so, to file a satisfaction as part of your settlement.
Is my communication with a debt settlement company privileged?
Probably not. In New York, the attorney-client privilege covers only confidential communications between a client and “an attorney or his or her employee,” under CPLR 4503. A settlement company’s debt specialist is neither. This matters because funders often sue businesses for diverting receivables and guarantors for bad faith, and there your version of events is often the key evidence. A lawyer may be able to engage a settlement company in a way the privilege covers, so ask.
How do fees compare in a debt settlement company vs law firm MCA engagement?
Debt settlement companies charge by percentage, while law firms usually charge on a per-funder, retainer or hourly basis. Published figures, from the companies themselves or from critics, put settlement fees at between 15% and 25% of the enrolled debt, or between 15% and 35% of the savings achieved; law firms charge between $3,000 and $10,000+ per funder, or start retainers at between $5,000 and $25,000. Consider an illustrative $180,000 load across three funders, settled at 50%:
| Type of fee | How it's calculated | Estimated fee |
|---|
| Debt settlement company, % of enrolled debt | 20% of $180,000, regardless of outcome | $36,000 |
| Debt settlement company, % of savings | 30% of $90,000 saved | $27,000 |
| Law firm, flat rate per funder | $7,500 x 3 funders, not including litigation fees | $22,500 |
If you fight a lawsuit, expect the law firm’s bill to go up.
Who holds each one accountable if something goes wrong?
Lawyers are licensed; debt settlement companies answer to general consumer protection and contract law. Lawyers who violate the rules can be disciplined by the state and/or sued for malpractice, and Pennsylvania’s Lawyers Fund for Client Security reimburses victims of attorney dishonesty. We found no New York or Pennsylvania law requiring a license to engage in commercial debt settlement; California requires companies to register, but only for consumer debt. You do have some protection from the FTC, which prohibits misrepresentation in business-to-business telephone calls; since February 17, 2026, the New York FAIR Business Practices Act has applied to these companies; and you’re protected by the contract you sign.
What about debt settlement companies who claim to have attorney support?
Use the same five points to judge that attorney support, and ask:
- Is it in writing that the attorney is engaged to represent your business?
- What is the scope of the representation? Will the lawyer represent you if you’re sued, or help you attack a judgment?
- Who pays the lawyer, and does the lawyer pay the debt settlement company? (In New York, Judiciary Law 491 makes it unlawful to receive a portion of a lawyer’s fee for sending business to the lawyer.)
See also: Do you need a lawyer to settle Merchant Cash Advances?
Frequently Asked Questions About Debt Settlement Companies
Is it legal for a debt settlement company to charge upfront fees?
For a business, probably yes. The FTC prohibits debt settlement companies from charging fees in advance of settling your debts under its Telemarketing Sales Rule, which protects consumers; however, business-to-business calls are exempt from the advance fee prohibition, although not from the prohibition against misrepresentation (such as misrepresenting what they can do to help you). Read the fees carefully before you sign.
Can law firms negotiate with all my funders like a debt settlement company?
Legally, yes. Their billing may differ, and they may not have handled stacked MCAs, so ask about their ability to negotiate globally and what it would cost.
Can I use both a debt settlement company and a law firm?
You can certainly try. Some people do, with the law firm handling any suit or judgment and the debt settlement company getting the best price. Just get it in writing, and don’t pay both to do the same thing.