The best Michigan business debt settlement companies are ones who understand and can use Michigan law to your advantage.
Can an MCA funder get a confession of judgment against you in Michigan?
Michigan does allow for confession of judgment in limited circumstances. The relevant statute, MCL 600.2906, permits judgment on confession without a pending action only by authority contained in "some proper instrument, distinct from that containing the bond, contract or other evidence of the demand," which must be filed with the clerk of the circuit court, "and not otherwise." While some have written that Michigan prohibits confession of judgment, the law is much more nuanced. On its face, a confession of judgment clause in the same document as the purchase agreement for the merchant's future receivables would not appear to meet this standard. A good Michigan business debt settlement company will review this for you. If your confession of judgment has been executed you can read more on whether or not it can be enforced.
Is my Michigan business debt subject to Michigan usury laws?
This depends on what type of entity you are. Michigan's usury law, MCL 438.41, makes it a felony to knowingly charge more than 25% simple interest per annum when not authorized by law, punishable by up to 5 years in prison, a $10,000 fine, or both. For business entities, non-bank lenders can lend money at any interest rate up to 25% agreed to in writing with any business entity. MCL 438.61. This includes sole proprietors who have signed a statement swearing that the loan is for business purposes. For corporations, however, MCL 450.1275 provides that the "defense of usury shall be prohibited." A good Michigan business debt settlement company will know whether or not usury is a useful tool in settlement. Whether a court will view your merchant cash advance as a loan is covered in our analysis of whether a merchant cash advance can be usurious.
Will my Michigan business debt case be heard in district or circuit court?
Your case will be heard in district court if the amount in controversy is $25,000 or less or in circuit court if it is greater. MCL 600.8301. Circuit courts with at least 3 circuit judges are required to establish a business court under MCL 600.8033, and are required by MCL 600.8035 to assign business and commercial disputes to that docket by blind draw. A business and commercial dispute is defined in MCL 600.8031 and includes disputes arising out of commercial contracts, which would include a dispute between a business and a merchant cash advance funder. The decision of the chief judge regarding whether or not a case is a business and commercial dispute cannot be appealed.
Many merchant cash advance funders sue Michigan businesses in New York state court and then enforce those judgments in Michigan. Under MCL 691.1173 a judgment from another state, once filed in Michigan, will have the same effect as a judgment from a Michigan court. This same section allows a judgment to be reopened, vacated, or stayed on the same grounds that a Michigan court judgment would be.
How fast can a judgment creditor take your bank account and receivables?
Before judgment MCL 600.4011 allows garnishment only when the court lacks jurisdiction over the defendant or the defendant cannot be served. After judgment Michigan Court Rules allow for two different types of garnishments. MCR 3.101. Periodic garnishments cover things like wages, commissions, rent payments, and contract payments. Nonperiodic garnishments cover things like bank accounts. The timeline for a garnishment is as follows:
MCR 3.101 Timeline for Garnishment in Michigan
| Step in MCR 3.101 | Time Limitation |
|---|
| Writ must be served on garnishee (e.g., bank) | 182 days after the writ is issued |
| Garnishee must send copy to you | 7 days |
| Garnishee must file verified disclosure | 14 days |
| You must object (if garnishment is to exempt property or writ was not properly issued or judgment satisfied or you filed for bankruptcy) | 14 days after the writ of garnishment is served on you |
| Garnishee may pay creditor | 28 days after service (if no objection pending) |
Money your Michigan customers owe your business can also be garnished as contract payments.
What property is exempt if I sign a personal guarantee in Michigan?
In Michigan outside of bankruptcy, the homestead exemption is only $3,500 in equity in up to 40 acres. Michigan also exempts $1,000 of household goods, $1,000 of tools of the trade, IRAs, 401Ks, and 403bs under MCL 600.6023, and MCL 600.6023a exempts property owned by you and your spouse as tenants by the entirety from execution on a judgment obtained against only one of you. You get a larger homestead exemption, enacted at $30,000 ($45,000 if you are 65 or older or disabled, and indexed upward every 3 years), if you file for bankruptcy in Michigan. MCL 600.5451.
Do Michigan business debt settlement companies need a license?
MCL 451.413 of Michigan's Debt Management Act requires anyone in the business of debt management to be licensed. Debt management is defined in MCL 451.412 to include someone who undertakes to plan the financial affairs of a debtor and who receives money from the debtor to pay creditors. There is nothing in these definitions that excludes business debts. However, attorneys performing debt management incidental to the practice of law and CPAs are exempt from this law.
Frequently Asked Questions
Can Michigan funders freeze my Michigan bank accounts before getting a judgment?
Generally, no. MCL 600.4011 permits garnishment before obtaining a judgment only when you can't be served or the Michigan court doesn't have personal jurisdiction over you. Also, wages may never be garnished prior to obtaining a judgment.
If my spouse doesn't sign the personal guarantee, is our house exempt?
MCL 600.6023a exempts property owned by you and your spouse as tenants by the entirety from execution on a judgment obtained against only one of you. If they get your spouse to sign, too, then your house is not exempt.
How long do Michigan funders have to enforce a New York judgment in Michigan?
MCL 691.1173 provides that once an authenticated copy of the judgment is filed with the clerk of a Michigan circuit, district, or municipal court, it has the same effect as a Michigan judgment. MCL 600.5809 provides that a judgment of a court of record, including those of other states, may be enforced for 10 years in Michigan.
Does a business debt settlement company need a Michigan license?
Michigan's Debt Management Act requires anyone in the business of debt management to be licensed, and there is nothing in its definitions that excludes business debts. However, attorneys performing debt management incidental to the practice of law and CPAs are exempt from this law.