To be among the best business debt settlement companies in Connecticut, a provider must understand the 2024 law regulating business cash advances and the prejudgment remedy law, which decide whether funders are legally allowed to do business in Connecticut, whether they can attach your assets without a hearing, and how much of your home they can reach. Connecticut does not license settlement companies that only work on business debt.
Does Connecticut regulate merchant cash advances?
Yes. Connecticut’s “commercial financing” law took effect July 1, 2024. It is Public Act 23-201, codified at Connecticut General Statutes 36a-861 to 36a-872, and applies to sales based financing of $250,000 or less repaid either by a percentage of the recipient’s sales or revenue or by fixed periodic payments with a mechanism to reconcile with actual sales. It covers brokers, and exempts banks, credit unions and their affiliates, and providers who make five or fewer Connecticut deals in a 12-month period.
At the specific offer, the provider must give you a disclosure form that includes:
- the total amount of repayment;
- the finance charge;
- the estimated time to complete repayment;
- any fees; and
- any compensation to the broker.
You must sign it before the financing is made. The Department of Banking prescribed the Commercial (Sales-Based) Financing Disclosure Form and is not accepting forms from other states.
How do I know if the funder is registered with the Department of Banking?
Ask the funder for proof that it registered with the Banking Commissioner. Providers and brokers had to register by October 1, 2024 through the Nationwide Multistate Licensing System (NMLS). The annual fee is $500, and the registration expires on September 15 if the fee is not paid.
Under C.G.S. 36a-872, the Commissioner can assess civil penalties and, for knowing violations, seek an injunction on behalf of recipients. The statute provides no private lawsuit and does not say a violation voids the contract. A provider’s job is to document the violation and bring it to the funder and the Department of Banking.
Can the funder attach my assets in Connecticut without notice and a hearing?
In general, no. C.G.S. 52-278a to 52-278n govern attachment, bank account garnishment and replevin before judgment. Funders used to put a waiver under 52-278f in the contract letting their attorney issue a writ without a court order, but C.G.S. 36a-868 voids that waiver in commercial financing contracts entered into on or after July 1, 2024.
The funder can still seek an ex parte order by sworn statement that you are concealing yourself, about to remove your property out of state, or fraudulently disposing of it. You can then move to dissolve the order, and the court must hear the motion within 7 business days. See Can a Merchant Cash Advance Funder Freeze Your Bank Account?
What can my provider do at the prejudgment remedy hearing?
Its job is to reduce the amount the funder can attach. Under C.G.S. 52-278d, the court needs probable cause that a judgment at least equal to the remedy sought will enter, and it must weigh your defenses, counterclaims and set-offs, even unfiled ones. Your side can ask the court to require a bond from the funder and to declare property exempt. If the writ is not served and returned within 30 days, the remedy is dismissed. This is a court hearing, so ask your provider which Connecticut attorney will handle it.
Can the funder enforce a New York judgment in Connecticut?
Not by registering it if it was a confession of judgment or a default judgment. Under C.G.S. 52-605(a), a funder registering a New York judgment must state it was not obtained by default in appearance or by confession of judgment. Otherwise it must sue in Connecticut under C.G.S. 52-607, which gives you time to appear. See What is a Confession of Judgment and is it still legal?
How much would they be able to take from me if I signed a personal guarantee?
Under C.G.S. 52-352b, there are no exemptions for your company. You personally keep:
| Asset | Connecticut protection |
|---|
| Home | Up to $250,000 in equity in the primary residence you live in, after mortgages (up from $75,000 for proceedings started on or after October 1, 2021) |
| Personal bank account | Identifiable exempt federal benefits, plus up to $1,000 of identifiable wages, or the balance if under $1,000 |
| Business bank account | Nothing protected under 52-367a |
| Vehicles | Two, worth up to $7,000 combined |
| Retirement plans | Exempt |
C.G.S. 37-9 allows the deposit index plus 17% on business loans between $10,000 and $250,000, and loans over $250,000 are exempt. That only matters if a Connecticut court deems the MCA a loan under Connecticut law, and most MCA contracts choose New York law.
How do I know which company to use to settle my business debt in Connecticut?
Since Connecticut has no business debt settlement license (see the FAQ below), make sure the company pulls your disclosure form, checks your funder’s registration, and looks at whether your contract predates July 1, 2024. It should work with a Connecticut attorney for any prejudgment remedy hearing, and base its offer on what the funder can actually take: your business account, your personal account above the $1,000 floor, and home equity above $250,000.
Frequently Asked Questions
My merchant cash advance was signed before July 1, 2024. Does Connecticut’s law still help me?
Partly. The ban on waiving the prejudgment remedy hearing covers only contracts entered into on or after July 1, 2024, so an older contract with a signed waiver may still let the funder’s attorney issue a writ without a court order. The homestead and the bar on registering confessed or default judgments apply regardless of contract date.
Do I need to use a company that is licensed in Connecticut to settle my business debt?
No. Connecticut’s debt adjuster and debt negotiation licenses cover consumer debt only; a “debtor” is “any individual who has incurred indebtedness or owes a debt for personal, family or household purposes.” Business-only settlement companies need no license, and attorneys are exempt. Do check that your funder and broker were registered with the Department of Banking.
Is my house safe if I signed a personal guarantee in Connecticut?
Up to $250,000 in equity of the primary residence you live in is exempt, after mortgages and other liens come off. Equity over $250,000 can be taken if the funder gets a judgment against you personally.
How much will be left in my bank account if my bank gets executed in Connecticut?
A personal account keeps identifiable exempt federal benefits plus up to $1,000 of identifiable wages, or the balance if under $1,000. An LLC or corporate account can be taken in full up to the amount on the execution.