Kansas City MCA Debt Relief Lawyers: 5 Questions Before Retaining a Team

Five Questions to Ask

Since Kansas City sits right on the state line between Kansas and Missouri, a merchant cash advance debt settlement lawyer has to be licensed in the right place. If you’re a business owner trying to decide who to hire, here are five questions to ask up front.

• Where are they licensed to practice, and are they in good standing?
• Who deals with the business creditor, and who appears in court?
• How are fees set, and is that in writing?
• What should you do, or not do, about payments?
• And what exactly does a settlement do?

Be careful of promises about discounts or timing; nobody honest can guarantee you a result.

Start with licensing: Kansas and Missouri set their own qualifications and licenses to practice in each place. The Missouri Office of Attorney Enrollment keeps the official roll of lawyers licensed to practice in Missouri, and that office can issue a certificate of good standing or a disciplinary certificate. The Kansas Bar has a lawyer referral service that is free of charge, although the lawyers who answer the referral set their own rates. And the Kansas Bar will only refer lawyers who are in good standing with the Kansas Supreme Court.

You should also ask up front if the lawyer knows what the disclosure rules are. The Kansas Attorney General enforces the Kansas Commercial Financing Disclosure Act, which took effect July 1, 2024. It governs transactions up to $500,000. The Attorney General can assess penalties of $500 per violation up to $20,000, but the law does not include a private right to sue, only the Attorney General. Missouri has passed a commercial financing disclosure law that likely covers merchant cash advances. The Missouri law, like the Kansas law, does not apply to transactions above $500,000. The Missouri attorney general enforces the law. And since August 30, 2019, New York has banned filing confessions of judgment against debtors who live outside the state. The industry itself has faced regulators’ attention: in 2022 the FTC got a court order permanently banning RCG Advances, formerly Richmond Capital Group, from the merchant cash advance industry and requiring it to cancel judgments and liens against former customers.

Ask up front who will talk with the creditor and do the negotiation, and who goes to court in case the creditor sues. Law firms and debt relief companies both work on cash advance obligations. What if your deal gets more complicated and the funder disputes a reconciliation request or invokes a guarantee? Or what if they file suit? When the stakes rise, your options diverge. In some cases MCA relief companies work with independent lawyers. Do not assume enrolling in a relief company program will provide court defense. And there should be a clear document that spells out the scope of the representation, the fee, and who will be handling the work.

If you want a lawyer to go to court for you, ask up front whether they can do that. The authority to practice law is governed by state rules and credentials; not everybody has the authority to appear in every court, and they may need to bring in local counsel to handle a matter. Ask your lawyer whether any local counsel is necessary for the work required and how that cost will be covered.

Ask up front for a clear statement of the fee and what it covers, in writing. Under Missouri Rule 4-1.5(c), a contingency fee agreement must be in a writing signed by the client. It must spell out the percentage that goes to the lawyer, and how expenses are deducted.

Ask the lawyer up front what their advice is about payments on the cash advance. Some debt relief programs recommend ceasing payments, or blocking the ACH debits, as a way of pushing negotiation. But many cash advance agreements have provisions governing default, and those agreements may treat an interruption in payments as a default. And if you default, the funder may demand the remaining balance, add fees, notify your customers and processor, pursue the personal guarantor, or even file suit.

Whether that demand is enforceable will take a bit of review; sometimes it is, sometimes not. And stopping payments is sometimes part of a legal strategy, but only after review of the agreements, cash flow and consequences. Just stopping payments will not necessarily produce a settlement or prevent a lawsuit. A revenue drop might also make the reconciliation clause relevant.

A Settlement

What exactly does a settlement resolve? A settlement is a negotiated agreement with the funder that may reduce the balance claimed, paid as a lump sum or in installments. It is not a cancellation, it is not new financing, and the deal will have its own terms. And a lower payment does not automatically mean a lower total. The figure at the top is only part of the deal. Ask for the amount of the installment, and the date each is due. What about guarantors? Are they released too? You should always ask what a missed payment triggers. What about continuing ACH debits? Does the settlement resolve that? When do those debits stop? How do they get stopped, and who makes the change? Ask in advance whether there will be a letter confirming the adjustment to ACH.

If you have several cash advance obligations, each one generally needs its own deal. And settling with one does not settle the others. A UCC termination is not necessarily part of a settlement; make sure to cover it. Keep a copy of the settlement, a confirmation of payment, and copies of each step of compliance by the other side.

Looking at All Your Obligations Together

Dealing with a cash advance can sometimes require looking at all your obligations together, and that can include considering bankruptcy. Subchapter V bankruptcies require fixed and undisputed debt of $3,424,000 or less on the filing date, counting half or more from business activity, but not counting debts from affiliates or insiders. Several merchant cash advances together can put a small business right up against that limit. Ask at your first meeting whether bankruptcy is an option, and be ready to discuss it.

Before anything else, do a simple review to be sure you don’t have a court deadline pending. There are deadlines for answering a complaint, and a settlement conversation by itself does not delay a response deadline. If you’ve been served, keep the papers and a note about how and when you got them. Bring all your documents to the meeting: MCA agreements, guarantees, payments, bank statements, default notices, UCC records, court papers, and anything from a debt relief company. It is tempting to leave things out when a conversation gets messy or there are layers of agreements, but that is a recipe for problems. A lawyer will want to review those documents and your payment history.

There is no reason to wait for missed payments or a lawsuit before asking a lawyer to review these contracts. If withdrawals are squeezing payroll, vendors, taxes, or several MCAs overlap each other, ask for an opinion sooner rather than later. It is a good idea to ask a tax professional whether a deal has tax consequences.