5 Restructuring Fee Models Ranked by Whose Interest They Serve

The Fee Model Tells You What Your Advisor Optimizes For

Every restructuring engagement is a bet on somebody else’s incentives. You are handing five funder relationships, your bank statements, and your personal guaranty exposure to a firm whose staff will make a hundred small decisions you never see: whether to push a funder’s counsel one more round, whether to enroll a position that is nearly paid off, whether to answer a complaint or let it slide another two weeks. None of those decisions get made in a vacuum. They get made by people who know exactly how their own compensation works.

So read the fee schedule before you read the testimonials. The five structures below are ranked from most aligned with you to least, and the ranking is not a matter of taste: it follows from what each model pays for. For each one you get the arithmetic on a real $600,000 stack, the behavior it rewards, what it looks like when it goes wrong, and the specific language to get in writing. The stack we use throughout is five positions of $180,000, $150,000, $110,000, $95,000, and $65,000, which is a thoroughly ordinary file for a trucking company or a staffing firm two years into stacking.

1. Contingency Earned Only on a Closed Settlement

The most aligned structure in the market is a fee that does not exist until a funder has signed something. In its clean form the firm earns nothing at engagement, nothing while it negotiates, and a defined percentage of the reduction once a written settlement agreement is executed for that position. Usually the percentage sits somewhere between 20 and 30 percent of savings, and the better agreements go one step further by deferring the fee until you have actually made a payment under the settlement, which puts the firm behind you in line rather than ahead of you.

Run the math. Your $600,000 in five positions settles at an average of 45 cents on the dollar, so you pay $270,000 and the reduction is $330,000. At 25 percent of savings the fee is $82,500, and your total cost is $352,500, or a bit under 59 percent of the original face amount. Each position bills separately as it closes, so if the $65,000 advance turns out to be nearly repaid and gets dropped from the plan, the fee on it is zero. Nothing accrues on a file that goes nowhere.

What this model rewards is closing, and closing deep. A negotiator paid on the reduction has a direct financial reason to grind out another ten points, and no reason at all to keep a hopeless position enrolled. From the funder’s side that shows up as a counterparty who keeps calling back with real numbers instead of a form letter, which is a large part of why funders respond to it. Delancey Street works on the no-upfront-fee version of this: nothing is due to begin, and the fee is earned when a settlement is reached.

The failure mode is the definition of savings. If the baseline is the total purchased amount including receivables that were never going to be collected, or the accelerated balance loaded with default fees and the funder’s claimed collection costs, then the percentage is being applied to a number that was never real, and your effective rate is much higher than the headline. Put the baseline in the engagement letter as the outstanding balance the funder asserts in writing on a specific date, and require the fee to be recalculated if that balance is reduced by a legal defense.

2. Flat Fee Per Position, Released on Milestones

Second place goes to a fixed price per creditor position, or per matter, paid out against events rather than dates. A typical structure prices each position somewhere between $7,500 and $15,000 depending on size and posture, and releases the fee in tranches: part when the funder puts a written offer on the table, part when a settlement agreement and release are executed, and the balance when the UCC-3 termination is filed. Nothing is due at signing. You know the total cost of the engagement before it starts, which is worth real money when you are managing cash to the week.

On the same stack, five positions at $10,000 each is $50,000, so your total outlay is $320,000 against $600,000 of face, roughly 53 percent. That is cheaper than the contingency in this scenario, and it flips if the settlements come in better than expected. Settle the same stack at 35 cents instead of 45 and the flat fee stays at $50,000 while a savings-based contingency would have gone up to about $97,500. Flat pricing transfers the outcome risk to you and the effort risk to the firm, which is a legitimate trade if you like certainty.

The behavior it rewards is throughput. A firm earning a fixed amount per position wants each one resolved efficiently, which is fine when the positions are similar and a problem when they are not. The predictable failure is triage: the two easy funders close in six weeks, the position with a judgment and a restraining notice already in place gets the same budgeted hours as the easy ones, and the firm walks away having earned three of five fees. Watch for a scope that quietly excludes litigated positions and treats them as a separate engagement at a separate price.

Get three things in writing. First, what each tranche requires, described as a document you will receive rather than a stage the firm declares complete. Second, what happens to unearned tranches if you terminate or if a funder refuses to deal, including whether anything is refundable. Third, whether a lawsuit, a motion to vacate, or a bankruptcy referral falls inside the flat fee or outside it, because that single line is usually the difference between a $50,000 engagement and a $90,000 one.

3. Hourly Attorney Time Under a Defined Scope

Hourly counsel sits in the middle of this ranking because it is genuinely neutral rather than aligned. A lawyer bills for time spent, typically $350 to $750 an hour depending on the market and the practice, and the engagement letter defines the work: answer the complaint in the Kings County case, oppose the summary judgment motion, negotiate two of the five positions, review the guaranty for enforceability. You are buying judgment and courtroom capacity, not a result, and the bill arrives whether the motion is granted or denied.

For the $600,000 stack, a narrow engagement to answer one lawsuit and negotiate two positions might run 40 to 90 hours, which at $450 an hour is $18,000 to $40,500. That is often the cheapest number on this page in absolute terms, and it is also the number most likely to move, because litigation budgets are estimates and opposing counsel controls half the calendar. Where hourly genuinely wins is anything adversarial: a motion to vacate a default judgment, a recharacterization argument, a reconciliation breach worth pleading, or a Subchapter V eligibility analysis.

The incentive here is to do work, and work is not the same thing as resolution. Nobody is suggesting your lawyer will pad a file, but an hourly engagement contains no mechanism that pushes toward the fastest closure, and it puts the client in the odd position of paying more for a stubborn funder than for a reasonable one. That is a defensible way to buy legal services and a poor way to buy five parallel negotiations, which is why many owners end up running a settlement engagement for the stack and hourly counsel for the one position that is in court.

Cap it. Ask for a not-to-exceed figure per phase, a monthly budget with a variance notice, and a written list of what is excluded, because the exclusions are where hourly engagements surprise people. One structural note worth stating plainly: Delancey Street is not a law firm. Legal work in its files is handled by independent licensed attorneys within its network, and if your matter needs hourly litigation counsel, that is who provides it and who sets that rate.

4. A Percentage of Enrolled Debt, Billed Monthly

Fourth is the structure that dominates consumer debt settlement and gets carried into business debt with the labels swapped. The fee is a percentage of the debt you enroll, commonly quoted in an 18 to 25 percent band, and it is collected on a monthly schedule out of a dedicated account over the life of the program. The critical feature is that the fee attaches to enrollment rather than to results. It is measured against the balance you brought in the door on day one, and the schedule keeps running whether a funder has agreed to anything or not.

On $600,000 enrolled at 25 percent, the fee is $150,000, which over a 36-month program is about $4,167 a month. Add the $270,000 of settlements and your total cost is $420,000, roughly 70 percent of the original face amount, against $352,500 under a savings-based contingency. At the bottom of the band, 18 percent, the fee is $108,000. And if two of the five funders refuse to deal and litigate instead, the fee on those positions does not shrink, because it never depended on them agreeing to anything in the first place.

Look at what that pays for. Enrolling the $65,000 advance that is 80 percent repaid adds $16,250 in fees at 25 percent and almost nothing in value, so there is no reason to talk you out of it. Time works the same way: a 48-month schedule collects more than a 24-month schedule on identical debt, so speed costs the firm money. Neither of those is fraud. It is a compensation structure doing exactly what it was designed to do, and it was designed for homogeneous consumer credit card portfolios where enrollment size really is a fair proxy for work.

Advances are not homogeneous. In a five-position stack, two positions are usually worth fighting on reconciliation or usury grounds, two should close this quarter at a discount, and one should be left alone. A fee tied to enrolled balance cannot tell those apart. If you are quoted this model, ask what happens to the fee when a position is resolved by a legal defense rather than a payment, and ask whether the schedule stops when the last settlement is signed. See also our page on how MCA settlements actually get done.

5. Upfront and Advance Fees

Fifth place is not a close call. An advance fee is money you pay before anything has been accomplished: a retainer, an analysis fee, a file review fee, a document preparation fee, commonly $10,000 to $50,000 wired before a single funder has been contacted. Some versions are dressed as milestones that turn out to describe internal steps, such as a fee due on completion of underwriting or on assignment to a negotiator. If the trigger is something the firm does to your paperwork rather than something a creditor signs, it is an advance fee.

The behavior it rewards is signing you up. Once the money is banked, the marginal return on the hard eleventh call to a funder’s counsel is zero, and the marginal return on the next sales call is not. The pattern we see on the back end is consistent: enrollment, a template hardship letter, three weeks of silence, a funder that never engaged, and a summons arriving on day sixty with the deadline under C.P.L.R. §320(a) already half gone. The fee is spent, the position is worse, and the file now needs litigation counsel it could have avoided.

Federal law has a clean rule for this, with a real limit on its reach. Under 16 C.F.R. §310.4(a)(5) no fee may be requested or received for a debt relief service until three things are true: one debt has actually been renegotiated, settled, reduced, or otherwise altered by a valid agreement; a payment has been made under that agreement; and the fee is sized either in proportion to that debt’s share of the enrolled total or as a fixed share of the savings achieved. The consumer side has lived under that standard since 2010, and it is a sound benchmark to hold a commercial firm to even where it does not bind.

The honest limit on that benchmark is its scope. The Rule’s debt relief provisions were built for consumer debt: §310.2(o) defines a debt relief service around unsecured debt, while advances are typically secured by a blanket UCC-1, and the exemption in 16 C.F.R. §310.6(b)(7) exempts business-to-business telemarketing from most of the Rule, though by its own terms that exemption does not reach the misrepresentation prohibitions in §310.3(a)(2) and (4). That is precisely the argument commercial outfits make for sitting outside §310.4(a)(5), and no court has settled it in this context that we could locate. Treat it as untested rather than as permission, because the FTC Act still reaches false fee claims and several states now ban the practice outright.

What the Rules Actually Say About Fees in Commercial Debt Work

The most instructive enforcement action in this space was not a Telemarketing Sales Rule case at all. In the FTC’s action against RCG Advances, the Commission alleged that RCG Advances and its owner marketed advances promising no upfront fees while withholding large undisclosed fees from the amount funded, so businesses received thousands of dollars less than promised, and separately used confessions of judgment to seize business and personal assets. The settlement announced on June 6, 2022 permanently banned the defendants from business financing and debt collection, required them to vacate judgments and release liens against former customers, and ordered payment of more than $2.7 million, with the proposed order filed in the Southern District of New York. The theory was deception under the FTC Act, which does not care whether your debt is commercial.

The state layer has moved fast, and it now reaches brokers directly. Florida’s Commercial Financing Disclosure Law, part XIII of chapter 559, applies to covered transactions of $500,000 or less consummated on or after January 1, 2024, and §559.9614 carries the advance-fee ban described above. Texas went further in 2025: H.B. 700 added Finance Code chapter 398, effective September 1, 2025, requiring providers and commercial sales-based financing brokers to register with the Office of Consumer Credit Commissioner, with existing businesses required to register by December 31, 2026 and renewals due each January 31, backed by a $10,000 civil penalty per violation under §398.101 and no private right of action under §398.102. Utah Code §7-27-201 requires registration with its Department of Financial Institutions, California Financial Code §22100 provides that no person may engage in business as a finance lender or broker without a license, and New York’s Commercial Finance Disclosure Law, Financial Services Law article 8 and 23 NYCRR part 600, reaches commercial financing offers of $2.5 million or less.

The Same $600,000 Stack, Priced Five Ways

Hold the outcome constant at a 45 percent average settlement, which sits inside the 30 to 60 percent band these files land in for us, and the five models cost this: $82,500 for a 25 percent contingency on the $330,000 reduction, $50,000 for five flat fees of $10,000, $18,000 to $40,500 for a narrow hourly engagement covering one lawsuit and two positions, $150,000 for 25 percent of enrolled debt, and $10,000 to $50,000 for an advance fee that has no relationship to the outcome at all. Total cost including the settlements themselves runs from about $320,000 to about $420,000 on the same $600,000 of debt.

Now change the outcome, because that is the test that separates the models. Settle at 35 cents instead of 45 and the contingency rises to roughly $97,500 while your payments drop by $60,000, so you are still $45,000 better off. Settle at 55 cents and the contingency falls to about $67,500. The enrolled-debt fee sits at $150,000 in all three cases, and the advance fee sits wherever it was wired regardless of whether a funder ever answered the phone. Only the first two models move when your result moves, and that single property is what the ranking on this page measures. For settlement ranges by size, see what a $1M position settles for.

Who Should You Call? Our Top-Rated Business Debt Firms

One firm on this list works the entire lifecycle of a business debt file, from stopping the daily debits through attorney-led negotiation, UCC lien removal, and a signed release. The other two cover broader debt categories that often sit alongside the advances. Choose accordingly.