Tennessee MCA Debt Relief Lawyers: 5 Questions for the Legal Consultation

Get your MCA debt lawyer to answer five questions:

• Are they actually licensed to practice law in Tennessee, and will they defend me if I’m sued in Tennessee?
• Is my confession of judgment valid in Tennessee?
• Should I stop paying until I’m sued?
• What must the settlement say to protect me in Tennessee?
• Are they paid by the hour, or by the debt?

The first question you should ask your MCA debt attorney is whether or not they are licensed to practice law in Tennessee. That seems a simple question, but the answer isn’t always what you expect. The Tennessee Board of Professional Responsibility’s online directory will show you who is licensed, and whether or not any public discipline has been filed against them, but it doesn’t answer the most important question: who will represent you if you are sued? A debt relief or debt management program is not a court defense. Your lawyer should be ready to settle the debt, and to defend you in court if necessary.

Tennessee Law Voids a Confession of Judgment

The second question you should ask your MCA debt attorney is whether or not your confession of judgment is valid in Tennessee. Tennessee law voids a confession of judgment signed before a lawsuit is filed and served. Notably, it also voids any judgment premised on that confession, not just the confession itself. Note, however, that the rule skips confessions of judgment signed after suit has been filed and served. Thus, a debtor who signs a confession as part of a settlement is not immune from judgment, nor is one who agrees to a forbearance agreement.

But the fact that your confession of judgment may be void in Tennessee doesn’t mean that an out-of-state judgment can’t be enforced in Tennessee. In Capital Partners Network v. TNG Contractors (2020), the Tennessee Court of Appeals was asked to decide whether an out-of-state confession of judgment could be enforced in Tennessee. It held that an out-of-state confession judgment is enforceable in Tennessee, if a reviewing court finds that the waiver of notice and a hearing was knowing and voluntary. So you should ask your MCA debt attorney whether or not your confession of judgment was knowingly and voluntarily signed. If your creditor has already obtained judgment against you, then you can ask a court to set aside the judgment, stay the judgment, or reopen the judgment.

Before You Stop Paying

The third question you should ask your MCA debt attorney is whether or not you should stop paying your MCA debt, if you have not been sued. Don’t let that question fool you: it doesn’t necessarily mean you will stop paying, but that you should have an open, frank discussion with your lawyer about what the risks are. If you stop paying, you can very well be sued even if you haven’t made a confession of judgment, and have a judgment against you for your failure to pay, as well as any penalties, or attorney’s fees permitted by your agreement. All of those things should be considered, before you stop paying. Debt settlement can take time, and even if you are near a settlement, that doesn’t pause the clock on a lawsuit or a judgment.

The fourth question you should ask your MCA debt attorney is what the settlement agreement should say, to protect your rights in Tennessee. This is vital, because even though Tennessee voids pre-litigation confessions of judgment, it doesn’t void settlement agreements. With an MCA debt, the creditor may also try to get access to the debtors’ bank accounts, by ACH. In the worst case scenario, the MCA can even try to claim a security interest in the debtor’s business. Thus, when negotiating a settlement for an MCA debt, its important to get an agreement which (1) releases the debtor, (2) does not permit collection by ACH, and (3) contains an assurance by the creditor that it has taken steps to delete any public filings which place a lien on the debtors’ business, after the debt is paid. You should also discuss whether or not your signature will stop the daily debits of your MCA.

If your business took advances from several lenders, ask each funder for a separate settlement. Just because you settled one deal doesn’t mean the others are settled, and be careful: a settlement which calls for a payment of less than the amount you owe may have tax consequences.

Written Contingency Agreements

The fifth question you should ask your MCA debt attorney is how they are compensated. Tennessee lawyers are required to have written contingency agreements for contingency fee contracts, signed by the client, stating how the fee is calculated. If your lawyer does not want to put the contingency fee in writing, you should reconsider the merits of hiring that lawyer, before it’s too late to retain another attorney. Get a clear statement of what the fee covers, and whether or not expenses are deducted before or after the fee is calculated.

To the consultation, you should bring in all of the paperwork for a comprehensive assessment, including the MCA agreements, any personal guarantees, payment history, bank statements, and if legal action is pending, any default notices or court papers. You should not expect your lawyer to offer figures or timelines as to a settlement: it’s not possible to appraise an MCA debt settlement without seeing the specific documents at issue.

If you expect any attorney to tell you what to do, or if it’s the “right” or “wrong” thing to do, that’s not what an attorney does. Instead, look to the lawyer to answer your questions about the legal risks of the choices you have, in full, and look to them to point out things you haven’t considered. If the attorney doesn’t explain to you what the legal risks are, or what they may mean to you, you may not be getting the information you need.