What Is MCA Debt Settlement?
MCA debt settlement is negotiating with a funder to accept less than the full remaining balance as payment in full. Settlements typically range from 30 to 60 cents on the dollar. The exact amount depends on your legal defenses, the funder’s collection costs and litigation risk, your demonstrated inability to pay the full amount, and the skill of your negotiator.
How the Process Works
- Contract review. Your attorney reviews all MCA agreements to identify defenses and leverage points.
- Financial analysis. Your current financial situation is documented to demonstrate what you can realistically pay.
- Initial contact. Your attorney contacts the funder with a formal demand letter or proposal.
- Negotiation. Back-and-forth over the settlement amount, payment terms, and release provisions.
- Settlement agreement. Written agreement including payment amount, schedule, full release of claims, UCC lien termination, and release of personal guarantees.
- Execution. Payment is made and the funder files required termination statements and releases.
What Makes a Settlement Successful
The strongest settlements are built on legal leverage. If your attorney can demonstrate the MCA may be recharacterized as usurious, that contract terms are unconscionable, or that the broker committed fraud, the funder’s calculus changes. Litigation is expensive and uncertain. A settlement at 40 cents looks much better than spending $50,000 on legal fees to potentially recover nothing.
Lump Sum vs. Installment Settlements
Funders strongly prefer lump sum because they get money immediately with no risk. If you can assemble a lump sum, you get a better deal. Installment settlements require a higher total amount and include a default clause reinstating the full balance if you miss a payment.
Getting Help
MCA settlement should be handled by an attorney, not a debt settlement company. The legal expertise required to evaluate defenses, negotiate effectively, and draft enforceable agreements is not something a non-lawyer can provide. And if negotiations fail, your attorney transitions seamlessly to defense.