MCA Resolution Fees
What a Business Retains Beyond the Advertised Reduction

The reduction the proposal advertises is not the amount the business keeps in its account.

Resolution fees, tax consequences, and obligations outside the agreement revise the advertised figure before a single creditor receives payment. The useful comparison begins with the full cost of the service and ends with the obligations that remain after the engagement closes. A percentage alone leaves the owner comparing shadows.

How the Fee Is Calculated

Often we see the base change after enrollment, though the percentage on the signature page remains where it began.

A fee drawn from enrolled debt differs from a fee drawn from the amount reduced. Both differ from a schedule of fixed charges that applies without regard to result, and from installments that continue after the negotiation ends. The same percentage produces extremely different totals when the base moves beneath it. The charge was disclosed. It was also invisible at the moment of decision.

A peculiar silence surrounds the calculation base in most proposals. The fee was, if we are being precise, a claim on the outcome rather than a price for the work, and the schedule permitted precisely this.

Simply request a written calculation that uses the actual balances proposed for enrollment, with every assumption stated beside the number. Gather and assemble the statements before enrollment, and require the calculation to use them. If a creditor revises its claimed amount, the charge should be recomputed before funds move rather than explained after they have moved. Resist the urge to compare proposals by percentage alone.

We would ensure the example names every assumption behind the sample. A base defined in order to preserve room for a larger charge is not a clerical choice. The signed illustration can later be used against the owner as proof of informed consent, which is why the definition deserves the slower reading.

A sample built on an unusually large reduction, applied to balances that no longer match the statements, extended across a schedule the owner has not confirmed, and discounted for a speed of resolution that the creditors have not promised, produces a figure that resembles arithmetic without performing it.

A proposal that runs to fourteen pages can devote eleven of them to authority the owner grants by signing, with the calculation itself confined to a single paragraph near the end.

Keep the schedule with the agreement. The date belongs beside the number, and the number belongs beside the name of the creditor it concerns.

When Payment Becomes Due

Thirty days after enrollment, the first question is rarely the size of the fee but the event that released it.

Ask whether each charge becomes payable when an offer is accepted, when the creditor receives money, or when the engagement ends for another reason. Review and analyze the treatment of deposits, installments, and canceled engagements in the same reading. The agreement should state whether money held for creditor payment can be applied to service charges, including the case where a deposit becomes "earned upon acceptance" without further notice.

The timing question is important and deserves attention at the start. Any assurance about the total, even casually offered, should be confirmed in the schedule before funds move.

The treatment of a canceled engagement belongs in writing before the first deposit moves. We would ensure the owner knows which deposits convert to fees upon cancellation and which return to the operating account.

There are arrangements in which a provider retains a portion of the funds, though the schedule as drafted leaves little room for them to operate.

Before funds move, before the creditor revises its claim, the owner should hold a written calculation that names the trigger for every charge. Steps taken, or not taken, in the first weeks decide what the deposits became. The trigger matters more than the total on the page where the owner signs, which is why the schedule deserves the slower reading of the two documents.

A percentage describes the negotiation. The ledger describes the result.

The Forgiven Balance and Its Tax Treatment

The IRS guidance on canceled debt states the general rule that a forgiven balance can constitute taxable income, subject to exceptions that include bankruptcy and insolvency. A settlement that erases principal can therefore create a tax obligation in the year of cancellation. Entity structure and tax classification affect the result, and no proposal can supply the facts that determine which exception reaches a particular business.

The owner should carry the potential liability inside the comparison from the beginning. A reduction that ignores the tax consequence overstates its own value by the amount later owed the Treasury, and the correction arrives in a year when the engagement has closed, and the engagement is judged by a single ledger rather than by any of its proposals. The longer IRS publication on canceled debt repays the slower reading, particularly the sections that condition each exclusion on facts the proposal cannot know.

Whether the insolvency exception reaches a particular business is a question for qualified tax advice rather than for the illustration attached to the proposal.

Something like a third of the comparisons we review omit the tax line, and the omission is never identified as a limitation of the illustration. I have yet to see a percentage quote that survived contact with the actual payoff figures, though the quote always arrives before the figures do.

The figure belongs in the total before enrollment, not in the return after it.

What the Proposal Leaves Out

The proposal governs only the accounts it names. Taxes, supplier balances, and secured financing continue outside the engagement and draw on the same receipts that fund the program. The operating forecast must carry their payments or the advice required to address them.

The owner should list every obligation. The list should include the creditor, the balance, and the dates on which each payment falls due. The forecast should include all of them. The excluded accounts still expect payment.

The Comparison That Controls

Every financing decision is a decision about which obligations survive. That is the habit of reading totals instead of percentages, learned once and kept through extremely lean months.

Most owners call after the schedule has already operated. I understand the delay.

We review the terms, identify the events that trigger each charge, and construct a total that includes every obligation the proposal leaves outside its border.

Delancey Street is a settlement company, not a law firm. It offers a free confidential initial review of the obligations proposed for enrollment, and it coordinates with independently licensed counsel where legal work is required. Consultation is where this conversation begins.