MCA Resolution Agreement Checklist
9 Terms to Review and 5 Red Flags

A settlement agreement deserves its closest reading after the amount is agreed, when relief makes the remaining pages look like administration.

That is where an unresolved guaranty survives, where a severe default term waits beside the release trigger, and where the signature commits the business to provisions no one read aloud on the call.

The nine terms below are review points for a particular agreement, and the five red flags are reasons to pause rather than proof that any clause is unlawful in every case. Counsel should assess the wording before execution.

Parties, Obligations, and Authority

The first term is the identity of the parties. Use legal names and distinguish the business from any owner who signed a guaranty.

The second term is the scope of the obligations: agreement dates with account references, a statement of which transactions the document resolves and which remain outside it. An owner with several advances who signs a release that names none of them will learn precision in the next collection letter.

General language sometimes suffices, though the cases where it does are not the cases that reach dispute.

The third term is authority, shown by something more substantial than familiarity with the account. An assignment or a change in servicing may explain unfamiliar names, and the explanation should arrive before payment rather than after. Opposing counsel in these matters tends to produce the assignment letter only when asked twice. Compare those provisions with the underlying documents before funds move.

Amount, Mechanics, Default, and Cure

The fourth term carries more weight than the discount printed beside it. Identify the total settlement amount and whether it absorbs all agreed charges or leaves a category payable outside the headline figure, then confirm dates, authorized instructions, crediting, and completion records. The figure in a cover email should match the figure in the agreement, though it seldom does.

The fifth term is the default process: what follows a late or failed payment, whether notice is required, whether the business holds an opportunity to cure, and how those consequences read beside the release trigger. A late payment under one paragraph is a breach with notice and cure, while under another it is acceleration without either. The contract allows what the cover email never mentions.

Whether funders draft these consequences to be invoked or to be feared is a question worth considering.

The business also needs a schedule it can perform, so simply place the required payments beside expected receipts and necessary operating expenses before signing. A document the owner cannot perform is an unfinished negotiation rather than a resolution.

Release, Guarantor, and Reserved Claims

New York statute that validates written releases addresses the validity of a written release given without consideration or a seal. The statute does not write omitted claims into the text, and the sixth term must supply scope, timing, and reservations in reviewable language.

The release is mutual. The obligations are not. This is where files close or reopen, and the seventh term concerns the guarantor (who signed a performance guaranty in the rush of funding and now faces its enforcement in the calm of default), and the agreement should state whether that individual is released and when.

Before the first installment is due, before the release has any effect, the business should understand what the funder retains and what the owner relinquishes through reciprocal concessions. The distinction behind that sentence is extremely technical and extremely practical at once. Counsel should compare the trigger, the default clause, and a calendar of what the business can pay.

Litigation, Filings, Records, and Cost

Most owners arrive at signing exhausted, which is the moment the remaining pages matter most.

The eighth term completes the public record: the agreed disposition of any pending case, the person responsible for preparing the filing, and the point at which confirmation reaches the business. Under New York rules on voluntary discontinuance, the default result proceeds without prejudice unless the filed document states otherwise, so the settlement should express the intended result in the document counsel will file.

Financing statements require their own instruction, beginning with identification of each filing and the action required after the applicable conditions are satisfied. New York termination provisions for financing statements supply conditional duties rather than automatic consequences. A lien search will show what the business faces, though the search holds surprises even for prepared counsel.

The ninth term gathers tax awareness, cost allocation, and administration: canceled debt can carry income consequences under the IRS guidance on canceled debt while fees, notice contacts, and merger language each need a stated term. Any side understanding, even briefly discussed, should appear in that language or be treated as abandoned.

Five Red Flags

An excessive default consequence is the first red flag. Where a minor payment failure permits a substantially larger demand, counsel should evaluate the provision and press for notice, cure, or a different consequence.

The second red flag is an unexplained confession of judgment provision. The New York confession of judgment statute imposes affidavit and county requirements, and its existence is neither a universal prohibition nor a reason to accept the clause without review. The clause was drafted in order to make challenge more expensive than compliance.

The third red flag is a release that runs wide in one direction and narrow in the other. The owner should understand which claims are surrendered and which remain available to the opposing party. Evidence gathered against the guarantor may survive a company only release that no one extended.

The fourth red flag is a forum or assignment provision whose practical effect has not been weighed. A future dispute may be directed to a distant court under terms the owner never priced, or settlement rights may transfer without notice to the party still performing. An outlandish acceleration clause sometimes hides in this section.

The fifth red flag is a charge appearing outside the negotiated total. An administrative fee or collection expense provision can change the apparent price. Ask for a complete calculation. The file should contain the final calculation before it contains the signature.

Assign the Remaining Work Before Signing

Delancey Street offers an initial review of MCA resolution possibilities through its debt settlement service. The company is a settlement company and not a law firm, and its commercial assistance is distinct from legal representation through independently licensed counsel. Resist the urge to treat execution as completion, and confirm who negotiates, who reviews, and which fees apply.

The owner should ensure the final payment date appears once, in one place, in identical figures. A settlement should leave fewer questions than the dispute it replaces, and the steps the business takes, or does not take, in the first week after signing decide which questions return.