The best business debt settlement companies will work with (or be) an Ohio-licensed lawyer who knows how to challenge cognovit (confession of judgment) warrants, vacating judgments under Civ.R. 60(B) and stopping bank levies in a matter of days. Do not expect much help from Ohio’s usury law.
How can an MCA funder get a judgment against you in Ohio without a lawsuit?
By using a “cognovit” a/k/a “warrant of attorney” contained in your contract, the funder’s lawyer can “confess judgment” on your behalf pursuant to R.C. 2323.13. The Court is required only to notify you after the judgment is entered. The complaint, the confession and the judgment all occurred on the same day in Henry County Bank v. Stimmels and Park View Federal Savings Bank v. Village Builders.
Ohio permits cognovits in commercial transactions, but R.C. 2323.13(E) voids a warrant of attorney in a loan made to a natural person primarily for personal, family, educational or household purposes. You can also confess judgment in person with the assent of the creditor pursuant to R.C. 2323.12, which will operate as a release of errors. Signing a new confession in a “restructured” deal hands the funder a cleaner tool than the original contract gave it.
Venue is fixed by statute, notwithstanding any agreement to the contrary. The funder must go to the municipal court where the maker lives or signed the note (if the amount is within its jurisdiction) or any other court in that county. See our guide to business debt settlement companies in Columbus, which is in Franklin County.
What defects in an Ohio cognovit should a provider look for?
A good provider starts with the warning. A warrant of attorney executed since 1/1/74 is void unless it contains a warning beginning “Warning--By signing this paper you give up your right to notice and court trial,” located directly above or below the signature lines and more prominent than anything else on the document.
| What to check | Why it matters in Ohio |
|---|
| Does the warning comply with the statute? | Park View upheld a bold, all-caps warning just above the signatures; equally bold headers elsewhere can support a challenge. |
| Were addenda or renewals signed without a warning? | Terms added by later agreements without their own warning may not be confessable. |
| Is the default something other than nonpayment? | The Third District held a cognovit judgment is limited to nonpayment, so a judgment built on a blocked ACH debit or a changed bank account is vulnerable there. |
| Was it filed in the proper venue, under the original warrant? | Either defect would void the judgment, but the funder could refile pursuant to the original warrant. |
| Do you dispute the amount of the judgment? | The court may reopen the case to hear evidence on the amount. |
Most MCA agreements provide for default for reasons other than nonpayment, such as “stacking” or changing your bank account. Read our guide to when a confession of judgment is enforceable in other states.
How do I get a cognovit judgment vacated in Ohio?
You or your lawyer must file a motion to vacate pursuant to Civ.R. 60(B). In most Ohio appellate districts that have addressed it, a cognovit debtor need only allege a meritorious defense and move within a reasonable time. Meritorious defenses include: payment, improper conduct in obtaining your signature on the cognovit, failing to follow statutory procedures or disputing the amount due. However, motions on grounds (1)-(3) must be filed within one year of the judgment. The debtor in Henry County Bank filed his motion 28 days after the judgment and prevailed on appeal.
Unless you are prepared to have your bank account garnished while the motion is pending, you will need to file a motion to stay enforcement of the judgment pursuant to Civ.R. 62(A), because a 60(B) motion does not operate to stay judgment. If your account has already been garnished, R.C. 2716.13 gives you until the end of the fifth business day after notice to request a hearing, which must take place within twelve days.
Does Ohio usury law help with a merchant cash advance?
Not likely. R.C. 1343.01 sets the general usury rate at 8%, but provides that the parties may agree to a higher rate if principal exceeds $100,000 or the loan is made to a business association, partnership, or sole proprietor for business purposes. R.C. 1701.68 also prohibits corporations from raising usury as a defense. The 25% criminal usury statute, R.C. 2905.21, makes an exception for interest “otherwise authorized by law.” However, contracts are often governed by New York law, and recharacterization arguments can be stronger there (see our New York business debt settlement guide).
What should you look for in business debt settlement companies in Ohio?
This is a race. A national program that takes between 24 and 48 months to settle your debt is probably not going to help you in time. A good provider should be able to read a cognovit warrant and get into an Ohio Court within a few days. Second, make sure an attorney licensed in Ohio reviews the warning, addenda and default notices. Finally, only a lawyer can file court documents on your behalf in Ohio. In 2020, the Supreme Court of Ohio imposed a $1,000 penalty on a debt negotiator in Ohio State Bar Association v. Watkins Global Network.
Personal assets that are exempt from execution also give you leverage in negotiations. Your residence may be exempt up to at least $125,000. The amount is subject to increase for inflation and adjusted by the Ohio Judicial Conference every third April. See R.C. 2329.66. Ask your provider for the current amount.
Frequently Asked Questions
Does signing a personal guaranty make my MCA a consumer deal that voids the cognovit?
Probably not. The court of appeals held in SHJ Co. v. Avani Hospitality, 2022-Ohio-1173 that cognovit judgments which included a personal guaranty were enforceable. It also held that how the proceeds are spent does not define the purpose of the loan. The argument for recharacterizing a merchant cash advance as a consumer loan will be stronger if you are a sole proprietor without a substantial business.
Will filing a motion to vacate under Ohio Civ.R. 60(B) stop the funder from levying on my bank account?
No. You will also need to file a motion to stay enforcement of the judgment pursuant to Ohio Civ.R. 62(A), which may be conditioned upon your providing security.
Can a debt settlement company work on my Ohio cognovit judgment?
Not directly. Only a lawyer licensed in Ohio can file motions in court, ask for a stay of judgment, or ask for a hearing to quash a garnishment. A debt settlement company can relay offers to the funder.