To qualify as one of the best business debt settlement companies in Texas, a provider must know Texas law, including: Texas’s prohibition of confessions of judgment, Texas’s new MCA regulations pursuant to Texas HB 700, and Texas’s strong protections of homesteads and wages.
Why does Texas law matter when you are seeking out one of the best business debt settlement companies in Texas?
Texas takes away the fastest collection tools funders use elsewhere, such as the overnight confessed judgment still available in Pennsylvania, and a provider who doesn’t know that will negotiate as if you were more exposed than you are.
Can a funder use a confession of judgment as a means of collecting an MCA in Texas?
Texas has long prohibited confessions of judgment. Texas Civil Practice and Remedies Code Section 30.001 (passed in 1985) states that in an instrument executed before suit is brought, a person “may not ... confess a judgment.” Texas HB 700 codified this principle for MCAs in Finance Code Section 398.055, effective September 1, 2025, which provides that a commercial sales-based financing contract that contains a confession of judgment provision “or any similar provision is void and unenforceable.”
Funders may still sue in New York under a forum clause and file that judgment in Texas under Texas’s foreign judgment statute, or sue in Texas and garnish your bank accounts. That takes time, and the best business debt settlement companies in Texas can often settle before legal action begins. Once suit is filed, Section 30.001 no longer applies, so a settlement may include an agreed judgment.
What does Texas HB 700 require MCA funders to do?
Texas HB 700, which created Chapter 398 of the Texas Finance Code, requires MCA funders and brokers to register with Texas’s Office of Consumer Credit Commissioner (“OCCC”), requires written disclosures when an offer of less than $1 million is extended, and prohibits automatic debits unless the provider has a first priority, perfected security interest. It reaches out-of-state funders serving Texas businesses online, but not banks or credit unions.
When Did Texas HB 700 Take Effect?
| Date | What happened |
|---|
| June 20, 2025 | HB 700 signed into law. |
| September 1, 2025 | Chapter 398 took effect, including the confession of judgment rule. |
| July 9, 2026 | OCCC rules (7 TAC 86.301 to 86.322) took effect, including the auto-debit rule. |
| September 1, 2026 | OCCC registration opened through NMLS. |
| December 31, 2026 | Deadline for providers and brokers already in business to register. |
Under the Texas OCCC Rules that implement Texas HB 700, an MCA funder can only take recurring debits if it has a valid, perfected, first-priority security interest in all of your accounts receivable. Only one funder can hold that position, so if a second- or third-position funder is debiting your account, some of the best business debt settlement companies in Texas can help you stop its automatic debits. Our guide explains how to legally stop ACH withdrawals from an MCA.
Violations can lead to penalties of $10,000 each, but there is no private right of action, so enforcement runs through OCCC complaints. The OCCC’s webpage on commercial sales-based finance explains registration, and funders already operating when HB 700 took effect have until December 31, 2026 to register.
How much can Merchant Cash Advance Funders Collect in Texas?
As a guarantor, your homestead is exempt from collection up to 10 acres if in a town or 200 acres if not and you are a family, or 100 acres if you’re a single adult (Tex. Prop. Code § 41.002). Unlike most states, Texas places no dollar limitation on the exemption (Tex. Prop. Code § 41.001). The homestead exemption even applies to urban homesteads used in business.
Other exempt property includes personal property up to $100,000 for families and $50,000 for a single adult (Tex. Prop. Code § 42.001). Your current wages cannot be garnished (Tex. Civ. Prac. & Rem. § 63.004). And if your spouse is not a guarantor of the MCA, his or her separate property and sole management community property are generally not available to satisfy your guarantees (Tex. Fam. Code § 3.202).
These protections do not apply to LLCs or corporations, and items you pledged in a UCC Security Agreement may be collectible even if exempt. But what the funder really wants is the company’s accounts and receivables, and you have more to bargain with than funders let on.
How should you vet a settlement provider in Texas?
It’s up to you. HB 700 requires funders and brokers to register, but it does not apply to debt settlement companies, and no Texas license clearly applies to a company that only provides business debt settlements. So, when you talk to debt settlement companies in Texas, make sure they can:
- Discuss why pre-suit confessions of judgment are not valid in Texas. They shouldn’t even threaten you with them.
- Check whether your funder has registered with the OCCC ahead of the December 31, 2026 deadline.
- Check UCC filings to determine if a funder has a first priority UCC filing on your receivables.
- Explain how the Chapter 398 disclosures differ from what you signed.
- Refuse settlements that put a lien on your house or require your spouse to sign.
See how much business debt settlement costs and our pages on debt settlement companies in Houston and other Texas cities.
Frequently Asked Questions
Can Merchant Cash Advance funders get a confession of judgment against me in Texas?
No. Pre-suit confessions of judgment are not permitted in Texas (Tex. Civ. Prac. & Rem. § 30.001). Since September 1, 2025, any contract for sales-based financing that contains a confession of judgment is void and unenforceable (Tex. Fin. Code § 398.055).
Does HB 700 apply to Merchant Cash Advance Agreements signed prior to September 1, 2025?
It is not clear. Neither the statute nor the OCCC regulations, adopted in July of 2026, make clear whether the legislation applies to contracts signed prior to the effective date.
Can I sue a Funder for violating HB 700?
No. Although a contract containing a confession of judgment is void under HB 700, there is no private right of action (Tex. Fin. Code § 398.102). You can file an OCCC complaint, which can lead to restitution and penalties of up to $10,000 per violation, and raise it as a defense if the funder sues you.
Can Merchant Cash Advance funders garnish my wages or my spouse’s wages in Texas?
No. Texas does not allow the garnishment of current wages for personal services, except to enforce child support and spousal maintenance obligations. If only you signed the guarantee, your spouse’s separate property and sole management community property is generally out of reach.