MCA Attorney: 7 Tasks a Lawyer Handles That a Settlement Company Cannot

A settlement company can do a great deal with a merchant cash advance file, and almost none of it happens in a courtroom. The work that does happen there belongs to an admitted lawyer, and it runs on a calendar the funder's counsel sets when the summons is served.

The seven tasks below are defined by the paper each one produces or the proceeding each one enters. Several overlap with negotiation. None can be handed to a negotiator, because each ends in a filing, an appearance, or an opinion on which a client is entitled to rely.

1. Entering the Case for the Company Is the Least Negotiable Task

The Supreme Court restated the rule in Rowland v. California Men's Colony in 1993: for "the better part of two centuries," a corporation has been able to appear in the federal courts only through licensed counsel. A business sued in New York state court meets its own clock, and that clock is short. CPLR 320(a) requires the appearance within twenty days of personal service, or thirty days where one of the other listed methods of service was used.

An LLC that misses that window has not chosen silence. It has invited a default judgment, which the funder may seek from the clerk when the claim is for a sum certain.

2. A Confession of Judgment Comes Apart by Motion, Not by Telephone

New York rewrote the filing rule in 2019. Under CPLR 3218(b), the affidavit of confession can be filed only in a county where the defendant lived when it signed or lives when the filing is made, and for a company that means a county holding one of its places of business. The amendment ended the practice of filing New York confessions signed by businesses with no presence in the state, though a confession signed by a company that does keep a New York location is another matter.

The lawyer's task is to set the affidavit beside the facts it swears to (the county, the amount, the account of how the debt arose) and, where they diverge, to ask the court for relief under CPLR 5015(a), which lists "fraud, misrepresentation, or other misconduct of an adverse party" and "lack of jurisdiction to render the judgment" among its grounds. In February 2026 the First Department affirmed a finding, in the Attorney General's case against Richmond Capital Group, of misrepresentations made "to courts in affidavits filed to obtain judgments against merchants," which is a sentence that should be read slowly by anyone holding a confessed judgment they do not recognize and still paying on it because the judgment looks final, since the finality of a paper filed with a clerk depends on the truth of what it swore.

3. Recharacterization and Criminal Usury Are Pleaded, Proved, and Sometimes Lost

The defense that an advance was a loan in disguise is the one owners hear about most, and it is the one that most requires a lawyer, because it lives or dies in the answer and the evidence rather than in a demand letter.

The frame comes from LG Funding, LLC v. United Senior Properties of Olathe, where the Second Department in 2020 said courts "usually" weigh three factors in deciding whether repayment is absolute: a reconciliation provision, a finite term, and recourse if the merchant declares bankruptcy. The agreement there let the funder adjust payments "at [its] sole discretion," treated bankruptcy as a default, and called for a confession of judgment if the merchant filed. The usury defenses survived. The court also dismissed the merchant's counterclaim, holding that criminal usury may be raised as a defense but not as the basis for a counterclaim.

The same frame produced the opposite result in Bridge Funding Cap LLC v. SimonExpress Pizza (Fourth Department, 2025). That agreement required reconciliation on request with proof of revenue, had no finite term, and disclaimed recourse on bankruptcy, and the majority held it a revenue purchase as a matter of law. Two justices, concurring in the result, would have replaced the three factors with a different test.

The clause that reconciles payments is only as real as the last time anyone used it.

What turns a successful characterization argument into relief is the Court of Appeals' 2021 decision in Adar Bays, LLC v. GeneSYS ID. A corporation cannot plead civil usury in New York, but it may interpose criminal usury, meaning interest above the 25 percent annual rate in Penal Law 190.40, and where that defense is established the loan is void, principal and interest alike. The court was careful to add that its ruling "does nothing to alter the borrower's burden." Adar Bays involved a convertible note, not an advance. The defense reaches an MCA only after a court finds the MCA was a loan.

Whether a reconciliation clause that exists on paper and was never honored should count for the funder is a question the reported decisions answer from each record, and the record in an owner's case has not yet been built.

Building it is the task: the bank statements set against the daily debits, the requests made and refused, and the rate calculation an expert must defend. A negotiator can mention the defense. Only counsel can plead it.

4. Restraints on a Bank Account Answer to the Court, Not to the Funder's Goodwill

A restraining notice under CPLR 5222 needs no judge's signature; the statute lets it issue from the clerk "or the attorney for the judgment creditor as officer of the court." Served on a bank, it forbids transfer of the debtor's property until the judgment is satisfied or vacated, or for one year, whichever comes first, though a bank that withholds twice the amount due is not restrained as to the rest.

A negotiator can ask the creditor to release the notice. A lawyer attacks what the notice rests on: the judgment itself, its entry, its service, and whether the funds restrained belong to the debtor at all. Those arguments go to the court that issued the judgment.

5. Bankruptcy Advice Includes the Part Owners Do Not Want to Hear

Section 362(a) of the Bankruptcy Code stays, once a petition is filed, actions and collection "against the debtor." The Second Circuit has said the stay does not ordinarily reach non-bankrupt codefendants, which means an LLC's chapter 11 case does not by itself stop a funder from suing the owner on a personal guaranty. Courts can extend protection to a non-debtor in limited circumstances, on motion, and that motion is legal work.

The rest of the advice is equally specific: whether the company fits Subchapter V's debt ceiling ($3,424,000 as adjusted April 1, 2025), whether a chapter 7 case ends the business, and what the lawyer is paid, since a debtor's attorney must disclose to the court whatever fee was paid or promised in the year before the petition. A settlement company offers none of this. It should say so without being asked.

6. A Defended Case Changes What the Funder Is Negotiating Against

The Bridge funder won on characterization and still lost its summary judgment. Its manager's affidavit stated one amount, the verified complaint another, and no one explained the gap, so the Fourth Department held the funder had not made its prima facie case and that the motion should have been denied "regardless of the sufficiency of defendants' opposing papers."

That is the ordinary texture of litigation, and it is the thing a lawyer reads for: the funder's own numbers, its own affidavits, its own proof of performance. A funder facing an answered complaint, a live characterization defense, and a motion it may lose is weighing discovery and delay against a payment in hand. The conversation about a number is different when a docket stands behind it (the funder knows this better than the merchant, having priced the difference into its collection practice long before the merchant signed anything).

7. The Deal Is Not Finished Until the Court File Agrees

A settlement reached while a case is pending ends with a filing: a stipulation discontinuing the action, a vacatur of a confessed judgment, or a satisfaction of judgment. The lawyer drafts that language so the record matches the bargain.

Otherwise the old judgment sits in the county clerk's index, unaltered.

The Negotiation That Runs Beside the Case

Delancey Street, which settles business debt by negotiation, is not a law firm. It does not answer summonses, move to vacate judgments, or give legal advice. What it offers is an initial review of the agreements and the payment history, confidential and without charge, and when a question crosses into law it works with attorneys who hold their own licenses. A business that has already been served, that holds a confessed judgment it disputes, or that is weighing a chapter 11 petition needs an MCA attorney first and a negotiator second, if at all. A business that is current, or behind but not yet sued, may reasonably evaluate the settlement route before the funder chooses the forum.

The division between these professions is older than the merchant cash advance. It exists because courts, like contracts, answer only to the people entitled to address them.