Pennsylvania MCA Debt Relief Lawyers: 5 Questions Before Retaining Assistance

Before rushing to hire a lawyer, raise the following five questions.

• Do I have an imminent deadline?
• Who and what does the contract cover?
• How much does she charge?
• Has she been disciplined by a bar association?
• Will just speaking to an attorney stop the next MCA from calling?

If you have a deadline you cannot miss, hire a lawyer immediately. It is as simple as that. You do have to answer the lawsuit. Look for the return date on the summons to see how long you have, and find the court and case number to pull the court’s docket. Do note that MCA lawsuits may name the business and owner separately. Lastly, neither talking to your banker, nor negotiating, nor swearing that your finger was broken when the fax went out stops that lawsuit from going to judgment.

In Pennsylvania, a confession of judgment on a business contract creates a shortcut to judgment. Subject to firm deadlines, you can challenge a confessed judgment by filing a written petition to strike or open judgment, normally within 30 days of service of notice of execution. And nearly all your defenses have to go into that first petition - any not raised at that time are waived. A petition filed after 30 days from service is subject to dismissal under Pa.R.C.P. 2959(a). However, compelling reasons for delay can help.

Still, one very underused opportunity is to ask a lawyer for help upfront, before you miss a payment. As for multiple MCAs, have your bookkeeper make a table of them. Each MCA should be listed by funder, balance, and daily or weekly withdrawal schedule. When reviewing one offer, it’s important to review them all. Don’t try to buy your way out by simply adding a new advance. Before signing for any advance, the very least due diligence is to consider what will be paid off, what will remain open, and how much is left for you.

Before paying a retainer, get an engagement letter. The letter should set forth whether one lawyer, or a team, will handle your matter; whether it is the business entity alone, or a group of entities and owners, who are being represented; whether your lawyer will be handling all settlement negotiations, or just the later litigation; who is authorized to appear in court; and whether it is the lawyer you are paying, or local counsel, who will be doing the heavy lifting. Know what’s covered in the engagement, or it’s out.

For a new client, standard fees in Pennsylvania have to be confirmed by a writing stating the “basis” or “rate” for charging. When a lawyer is proposing a contingent fee, e.g. a percentage of savings achieved in your litigation, there has to be a letter or agreement explaining clearly how that percentage will be calculated. Finding a lawyer can be expensive, and so finding one on a budget can be hard. In 47 counties there is a lawyer referral service connected with the bar association: you pay no more than $30 for the first 30 minutes of the consultation.

Before hiring an attorney, know whether and how she has been disciplined. The Disciplinary Board of Pennsylvania provides a Lookup an Attorney tool that gives contact information and disciplinary history. The results may be incomplete, however; pre-2003 disciplinary actions have been hard to find. If your question goes back farther than that, ask the Executive Office of the Board. When all else fails, some unhappy clients can turn to the Lawyers Fund for Client Security. Claims are available to victims of an attorney’s dishonesty. The Fund pays out of a pool collected from all practicing lawyers’ dues.

Importantly, no one can promise you a reduction or a dismissal. While “MCA” and “loan” may seem interchangeable, whether you have one or the other is up to your contract, and not the label someone put on it. There’s another catch: a “factor rate” doesn’t represent the true rate of interest. PA’s Act 57 of 2008 does away with the rule that 6% should be the top rate of interest on a business loan. One real difference between an MCA and a loan is whether it is a ”true sale” and not subject to usury. Courts usually look at provisions for reconciliation of the account, for a fixed term, and for bankruptcy treatment of the account.

While negotiating a settlement, ask what you’ll be getting next year. All that canceled debt counts as taxable income - unless your business, or you, qualify for an exception such as insolvency. You can expect a 1099-C form reporting the amount, too, if a financial institution cancels $600 or more.

Finally, even making that initial call, or meeting, won’t pause a lawsuit or collections by itself. What you can use those attorney calls for is preparing your defenses - so bring copies of all bank statements, notices, transfers and agreements. If your funds are being seized or your bank accounts wiped out, speak up.