A recent decision from the United States Bankruptcy Court for the District of Colorado should get the attention of debt settlement companies, servicing platforms, and law firms operating under an attorney-model structure. In In re Jason Dean Clark, 2026 WL 893707 (Bankr. D. Colo. Mar. 31, 2026), the court closely examined whether a debt settlement law firm and its affiliated servicing company could rely on Colorado’s legal-services exclusion to avoid liability under the Colorado Uniform Debt Management Services Act (“CUDMSA”).
The opinion is worth careful review because it provides an unusually detailed analysis of how a court may evaluate the relationship between debt settlement law firms, affiliated servicing companies, and the attorneys used to support an attorney-model structure. For subscribers of Debt Relief Watch, the case is particularly useful because the court did not stop at the labels used by the parties. Instead, it examined how the program actually operated, what the retainer agreement promised, and whether legal services were truly being provided.
The plaintiff was the Chapter 7 Trustee for an individual debtor who had enrolled in a debt settlement program after accumulating significant unsecured credit card debt. The defendants were a law firm offering debt resolution services and its affiliated servicing company. The law firm operated as the front-end legal entity, entering into retainer agreements with consumers seeking debt resolution services, while the servicing company functioned as the operational back-end, handling much of the client-facing work and day-to-day servicing of the accounts.
The structure will sound familiar to many in the industry. The law firm used Colorado-licensed “Class B” attorneys who were paid small flat amounts for specific tasks such as consultation calls, quarterly reviews, annual reviews, and settlement approvals. At the same time, non-lawyer negotiators and customer service representatives handled creditor negotiations, client communications, and most of the practical work associated with the file. The affiliated servicing company also received the overwhelming majority of the settlement-related revenue.
The debtor signed a retainer agreement describing an attorney-client relationship and outlining legal services, debt negotiation services, litigation defense services, and attorney supervision. As the case developed, however, the debtor continued to face creditor pressure, was sued by at least one creditor, and ultimately filed Chapter 7 bankruptcy. The Chapter 7 Trustee then pursued claims under CUDMSA, arguing that the defendants were operating as unregistered providers of debt-management services. The real dispute became whether the defendants could rely on the statutory legal-services exclusion or whether the attorney model was simply a label placed on what was, in substance, a debt settlement program.
CUDMSA regulates providers of debt-management services and generally requires registration before those services can be offered to Colorado residents. The statute defines debt-management services broadly and includes services performed as an intermediary between an individual and one or more creditors for the purpose of obtaining concessions. Colo. Rev. Stat. § 5-19-202(8). The statute also contains an exclusion for “legal services provided in an attorney-client relationship by an attorney licensed to practice law in this state.” Colo. Rev. Stat. § 5-19-202(8)(A)(i).
The defendants relied heavily on that exclusion. Their position was that because the consumer signed a retainer agreement with a law firm and Colorado attorneys were involved in the process, the arrangement qualified as legal services rather than debt-management services subject to registration. The court rejected that argument and made clear that the existence of a retainer agreement, attorney titles, and periodic attorney review were not enough by themselves.
Instead, the court looked at what services were actually provided, who provided them, and whether the consumer had a real attorney-client relationship with a Colorado attorney. It first found that both the law firm and the servicing company were plainly acting as intermediaries between the debtor and his creditors for the purpose of obtaining concessions. That brought the conduct squarely within the statutory definition of debt-management services. The court then turned to whether the defendants could carry their burden of proving that the legal-services exclusion applied.
The court found they could not because the evidence did not establish that the Colorado attorneys were actually providing legal advice or legal services to the debtor in the context of a true attorney-client relationship. Their role was largely limited to reviewing files and approving settlements through the company’s internal system. The court viewed that activity as business review rather than legal representation. As the opinion explains, determining whether a settlement fell within the company’s internal parameters “may constitute business advice or business services to” the law firm, “but it does not constitute legal advice or legal services to the client.”
That distinction matters for any law firm using Class B attorneys or affiliated-attorney structures. Internal approval of settlements, periodic reviews, and nominal attorney participation may help support the company’s operations, but they do not necessarily create the kind of attorney-client relationship needed to satisfy a statutory legal-services exclusion.
The court also spent significant time reviewing the retainer agreement itself, which is unusual and important. Courts do not often go line by line through an attorney-model engagement agreement to determine whether the promised legal services were actually delivered. Here, the court did exactly that.
The retainer agreement stated that attorneys would supervise work they did not directly perform, provide litigation defense services, supervise third-party entities, craft and review the debt negotiation plan, counsel the client by phone, and provide bankruptcy-related services. The agreement also stated that the firm was a “full-service debt resolution law firm” providing debt negotiation, restructuring, and bankruptcy services, and specifically promised that it would discuss and advise the client regarding bankruptcy options, including fees and costs, if the client’s circumstances changed or if the client requested that consultation.
The court found that these representations did not match reality. According to the opinion, the Colorado attorneys did not supervise the work they did not perform, did not represent the debtor in creditor litigation, did not supervise third-party entities, did not craft the debt negotiation plan, did not meaningfully counsel the debtor, and did not provide bankruptcy advice.
The bankruptcy issue is worth noting because the stronger point was not that every debt settlement lawyer must be a bankruptcy specialist. Rather, the provider chose to market itself as a full-service debt resolution firm offering bankruptcy services and expressly promised bankruptcy advice in the retainer agreement. The debtor became unemployed, repeatedly asked about bankruptcy, and no Class B attorney discussed bankruptcy with him. Instead, the only bankruptcy-related information came from a non-lawyer customer service representative who was not supervised by a Colorado attorney. The court found that information was not applicable to the debtor’s actual financial situation and noted that he in fact qualified for Chapter 7 relief. Had he filed bankruptcy earlier instead of participating in the program, the court found he would have saved money.
That part of the opinion should be read carefully by any law firm operating under the attorney model. If a retainer agreement promises attorney supervision, litigation support, bankruptcy-related advice, or legal review, the operational record must show those services were actually provided. Otherwise, the agreement becomes evidence against the provider rather than protection for it.
The court then addressed the core issue directly: whether there was a legitimate attorney-client relationship at all. Relying on Colorado Supreme Court precedent, the court noted that CUDMSA was designed to prevent providers from evading the statute “by creating a sham relationship between its customers and an attorney.” It also emphasized that the legal-services exclusion does not apply merely because a consumer speaks with or enters into a nominal agreement with an attorney if the real intermediary between the consumer and creditors is someone else.
The court’s own language was unusually direct. It found that the relationship between the Class B attorneys and the clients was a sham relationship. It then stated that the law firm was “a law firm in name only, a façade” and that, in substance, it was a debt-negotiation firm. The work, according to the court, was performed by non-lawyer negotiators and customer service representatives who were not supervised by the Class B attorneys.
For debt settlement lawyers and companies relying on the attorney model, that is the heart of the decision. The court did not reject the attorney model in the abstract. It made clear, however, that the model will be tested based on substance, not labels. A law firm structure will not protect a program if the lawyers are not actually providing legal services, if non-lawyers are functioning as the real intermediaries with creditors, and if attorney involvement is limited to internal approvals or nominal file reviews.
The decision also underscores the importance of supervision by attorneys licensed in the consumer’s home state. That means actual supervision of the debt negotiators, customer service representatives, and the individuals servicing the file or communicating with creditors. Colorado law allows the legal-services exclusion to extend beyond attorneys in some circumstances, but only where those individuals work for the attorney “in substance, not just in name,” and under the attorney’s real supervision.
That is a difficult standard to satisfy where a separate servicing company performs the core operational work and the state-licensed attorneys have little day-to-day involvement. A law firm cannot simply attach attorneys to the structure and expect that alone to create protection under state law.
This case should be read as a warning to the industry. Attorney-model programs cannot rely solely on retainer language, attorney titles, or nominal state-bar participation. Courts and regulators may ask whether there is a real attorney-client relationship, whether the attorney is actually advising the client, whether non-lawyer personnel are being meaningfully supervised, and whether the promised legal services are actually being provided.
The most important lesson from the decision is simple: if a program is going to rely on the legal-services exclusion, it needs to operate like a legal-services program. Otherwise, the law firm may be treated as a façade, the servicing company may be treated as an unregistered debt-management provider, and the attorney-model defense may fail.