Best business debt settlement companies in Colorado know that:
- business-only providers aren't regulated by the Colorado Uniform Debt Management Services Act;
- the Colorado usury limit of 45% applies to merchant cash advances only if the advance is recharacterized as a loan; and
- the homestead exemption in Colorado protects $250,000 in equity in your home.
Few pages on the Internet about "business debt settlement companies in Colorado" even discuss the relevant Colorado statutes.
What are the Licensing Requirements for Business Debt Settlement Companies in Colorado?
Companies that only settle business debt don't have to register in Colorado. The Colorado Uniform Debt Management Services Act, Colo. Rev. Stat. § 5-19-201 et seq., applies only to services provided "as an intermediary between an individual and one or more creditors of the individual." A provider "that provides debt management services only to persons who incurred debt in the conduct of a business" is exempt. Colo. Rev. Stat. § 5-19-203(b)(3).
However, since July 1, 2008, companies serving both consumers and businesses must register if they serve Colorado consumers. Colo. Rev. Stat. § 5-19-204. The Colorado attorney general's office has a list of registered debt management service providers, and a consumer debt settlement brand that also settles MCAs should be on it.
What Colorado Consumer Protections Apply to Business Debt Settlement?
Almost none, if you use a debt settlement provider that only works with businesses. The Act's fee provisions, Colo. Rev. Stat. § 5-19-223, only apply to "individuals" in consumer programs. The Uniform Consumer Credit Code covers only "consumer credit transactions" under Colo. Rev. Stat. § 5-1-201. However, some of the pages of our competitors don't understand that.
That said, consider writing some of the consumer protections into your contract with your debt settlement provider:
- no fee until the company has settled at least one of your debts and you've made at least one payment to your funder under that settlement;
- a fee that is a proportional amount of the debt you enroll or a fixed percentage of the savings;
- total fees and settlement payments that don't exceed the principal you owe; and
- your money held in an account that you own and can withdraw from.
For fees nationally, see our page How Much Does Business Debt Settlement Cost?
Does the Colorado 45% Usury Limit Apply to Merchant Cash Advances?
If the merchant cash advance is recharacterized as a loan, yes. By written agreement, a loan can bear interest above 8% but not above 45% per annum. Colo. Rev. Stat. § 5-12-103. Knowingly charging a loan finance charge above 45% APR is a class 6 felony. Colo. Rev. Stat. § 18-15-104.
The civil limit doesn't apply to commercial credit plans unless the parties opt into the statute in their agreement, and the criminal statute gives lenders an affirmative defense when the rate couldn't have been determined by mathematical computation at signing, which is close to how MCAs with uncertain payment timing are drafted. We couldn't find a Colorado appellate case recharacterizing an MCA, and many MCA contracts choose New York law. A good company or lawyer will consider recharacterization before negotiating, and won't oversell it. For more, see our page Can a Merchant Cash Advance be Usurious?
What Property Can a Funder Take From You in Colorado?
If you gave a personal guarantee and the funder gets a judgment, Colorado's exemptions affect what you can settle for. Since Senate Bill 22-086 took effect April 7, 2022, the homestead exemption has been $250,000, up from $75,000. Colo. Rev. Stat. § 38-41-201. It rises to $350,000 if an owner, spouse or dependent living there is 60 or over or disabled.
Some of the exemptions available in Colorado for an individual guarantor
| What can a funder take? | What is exempt in Colorado | Statute |
|---|
| Home equity | First $250,000 (first $350,000 if 60 or older or disabled) | C.R.S. 38-41-201 |
| Tools, stock and equipment of main occupation | First $60,000 (first $20,000 of other occupation) | C.R.S. 13-54-102(1)(i) |
| Up to two vehicles | First $15,000 total (first $25,000 if elderly or disabled) | C.R.S. 13-54-102(1)(j) |
| Bank accounts | First $2,500 | C.R.S. 13-54-102(1)(w) |
| Retirement accounts and HSAs | Retirement accounts and HSAs are exempt | C.R.S. 13-54-102(1)(s) |
| Wages | Garnishment limited to the lesser of 20% of disposable earnings or the amount above 40 times minimum wage | C.R.S. 13-54-104 |
A $400,000 home with a $180,000 mortgage leaves $220,000 of equity, all exempt because it is under $250,000. With $500,000 of equity, some is available to judgment creditors. None of the exemptions apply if you signed a Deed of Trust on your home. The exemptions also protect only you as the guarantor and do not apply to your business, such as your LLC's bank accounts or receivables. Colorado does not allow residents to claim the federal bankruptcy exemptions (C.R.S. 13-54-107), so the same exemptions apply in a personal bankruptcy filing. Funders with an out-of-state judgment can enforce it here if they file it in Colorado (C.R.S. 13-53-103), which we discuss on our Best Business Debt Settlement Companies in Denver page.
How do you compare business debt settlement companies in Colorado?
Ask the questions above to see if they know Colorado law, are registered or are licensed Colorado attorneys. Colorado-licensed attorneys are exempt from the Act, but the exemption does not apply to non-employees working on behalf of the attorney. Hold fees to the checklist above. Some may claim that the 45% usury limit is a sure thing or that the statute of limitations is 3 years and running out. But the limitations period for liquidated debts (debts where the balance is not in dispute) is 6 years in Colorado (C.R.S. 13-80-103.5).
Frequently Asked Questions
Does a business debt settlement company need to register in Colorado?
No, as long as they only work with people who incurred the debt in the conduct of a business. If they also serve Colorado consumers, they need to register with the Colorado Attorney General, who maintains a list of registered providers.
Can a funder take my house if I personally guaranteed an MCA in Colorado?
Not as long as the equity in your home is less than $250,000 and you or your family lives in the house. The limit is $350,000 if you, your spouse or a dependent is 60 or older or disabled.
Do Colorado's exemptions protect my LLC's bank account?
No, the exemptions only apply to you, not your LLC or Corporation.
How long does a funder have to sue on business debt in Colorado?
While the statute of limitations on contracts is 3 years, a suit to recover a liquidated debt has a 6 year statute of limitations (C.R.S. 13-80-103.5). Most suits over a Merchant Cash Advance or loan balance are liquidated debts.