The best business debt settlement companies in Pennsylvania are the companies that know Pennsylvania law, and can hire a lawyer in Pennsylvania within 30 days of when a confessed judgment has been made against you.
If you live in Philadelphia, PA check out this article about business debt settlement in Philadelphia, PA and our Commerce Program.
Can a funder get a judgment against your Pennsylvania business without suing you?
Pennsylvania allows confessed judgments on commercial obligations, other than "an instrument executed by a natural person in connection with a consumer credit transaction." 231 Pa. Code § 2950. Since neither a merchant cash advance nor the related guaranty is for a consumer credit transaction, neither document is excepted.
The funder files a complaint with the prothonotary of the Court of Common Pleas in one of Pennsylvania's 67 counties pursuant to 231 Pa. Code § 2951. No judge is involved, there is no hearing, and the main way to contest it is a petition to strike or open within 30 days of when the debtor is served with notice pursuant to 231 Pa. Code § 2959. The petition must list all of the debtor's defenses, or those defenses are waived. If the funder levies the debtor's bank account without prior notice pursuant to 231 Pa. Code § 2958.3, the debtor can request a hearing within 3 business days. If you have been served, see our article about what you should do; when choosing a provider, choose one who can act within 30 days.
Does Pennsylvania usury law apply to merchant cash advances?
Pennsylvania usury is rarely an issue in business debt settlement, and a company focusing on it may be overselling its ability to get your debt settled. Pennsylvania's Loan Interest and Protection Law sets a 6% maximum rate for loans of $50,000.00 or less, but Section 201(b) provides that the cap does not apply to "business loans of any principal amount." In 2008, the legislature substituted "of any principal amount" for "in excess of ten thousand dollars ($10,000)." Act of July 8, 2008, P.L. 824, No. 57. So even if a merchant cash advance were considered a loan, Act 6 would not cap it. However, 18 Pa.C.S. 911, Pennsylvania's Racketeer statute, treats collecting debt from a loan charging more than 25% per year "where not otherwise authorized by law" as racketeering activity. Whether Act 57 of 2008 supplies that authorization for business loans is still unclear. If your contract is subject to New York law, see our article about business debt settlement in New York.
If the funder gets a judgment against me, what can they take from me in Pennsylvania?
The funder can take your business bank accounts, but not your paycheck, and whether it can take your house depends on how the house is titled.
| Asset | Pennsylvania rule | What it means for you |
|---|
| Wages in your employer's hands | 42 Pa.C.S. 8127 | Exempt. There is no exception for business debt. |
| Personal property | 42 Pa.C.S. 8123 | $300.00; no homestead exemption outside bankruptcy |
| Retirement plans | 42 Pa.C.S. 8124 | Generally exempt, with limits on contributions |
| Home and joint accounts with spouse | Tenancy by the entireties case law | Protected if only one spouse signed the guaranty |
| Home in bankruptcy (federal option) | 11 U.S.C. 522(d) | $31,575.00 homestead, $1,675.00 wildcard, and up to $15,800.00 of unused homestead |
Pennsylvania courts have held that tenancy by the entireties is not subject to the claims of a creditor of only one spouse. Spouses' joint bank accounts are presumed entireties property unless the creditor rebuts that with clear evidence. It will not protect you if both spouses signed, and re-titling assets after a default can lead to a fraudulent transfer claim.
Any good provider should ask at intake who signed the guaranty and how your house and accounts are titled. If only one of you signed and you own the house as tenancy by the entireties, the funder cannot take it, which should lower the settlement.
Even without a judgment, your receivables are open to attack by a funder. Once a customer receives signed notice, Pennsylvania law requires it to pay the funder to discharge the bill, though it can keep paying you until the funder provides proof of assignment. See 13 Pa.C.S. 9406. Ask each provider how they handle these letters.
Do business debt settlement companies in Pennsylvania need a state license?
Generally, no. The Debt Management Services Act covers consumer debts incurred for personal, family, or household purposes. So a company saying it is licensed in Pennsylvania means little for an MCA.
18 Pa.C.S. 7312 makes it a misdemeanor of the third degree to pool debts, that is, accept money to distribute to creditors for a fee, unless all members of the firm are lawyers licensed in Pennsylvania. Ask each company whether they will be taking your money and distributing it to funders. Only a lawyer can file a petition in the Court of Common Pleas for an LLC or Corporation, so if you are dealing with a non-lawyer, do they have a lawyer licensed in Pennsylvania who can take a Confessed Judgment? Delancey Street, for example, says it does not deal with MCA debt except through its network of lawyers licensed in 49 states. Also learn how each of them charges for their services.
Frequently Asked Questions for Pennsylvania Business Debt
Can the MCA funder garnish my paycheck in Pennsylvania?
No. 42 Pa.C.S. 8127 exempts "wages, salaries and commissions" while in the hands of the employer, and the exceptions do not include commercial or guaranty debt. This does not protect business accounts, and the funder will go after those first.
Can they take my house if only I signed the personal guaranty?
Not if you and your spouse own the house as "tenants by the entireties," and only you signed the guaranty. If your spouse signed as well, then the funder is a creditor of both spouses, and your house is not safe.
Will the debt settlement company, or a lawyer, file the petition to strike or open?
A lawyer. Only a lawyer licensed in Pennsylvania can file a petition in the Court of Common Pleas on behalf of an LLC or Corporation. If your debt settlement company is not a law firm, make sure it has one lined up.
What if the funder is in New York, and the contract says it is under New York law?
As of August 30, 2019, the funder cannot file a New York Confessed Judgment against a business outside of New York. So they can either get a Confessed Judgment in Pennsylvania, or they can sue you in New York, and file their judgment in any county in Pennsylvania pursuant to 42 Pa.C.S. 4306. If the contract is under New York law, usury will be decided under New York law.