Business debt settlement companies in Virginia need to know Virginia's sales-based financing law (effective in 2022), which requires funders to register with the SCC and eliminates out-of-state forum and confession of judgment clauses, and the 21-day period you have if a funder confesses judgment anyway.
Virginia does not license companies that solely do business debt settlement.
Is the Virginia sales-based financing law applicable to your merchant cash advance?
It likely is if your principal place of business is in Virginia and the advance is paid as a portion of your sales or revenue. Va. Code 6.2-2228 defines sales-based financing as including a "true-up mechanism," so even a fixed daily debit with a true-up is likely covered. If you reside in Virginia but your company is in another state, the law likely does not apply. Maryland owners can see our guide to choosing a business debt settlement company in Maryland.
There are three exceptions under Va. Code 6.2-2229, for financing provided:
- by a financial institution;
- by a provider that enters into no more than five such transactions with the recipient in 12 months; or
- in a transaction for more than $500,000.
The best business debt settlement companies in Virginia should be able to tell which of your advances are covered.
How do you check whether your funder registered with the SCC?
Ask the SCC's Bureau of Financial Institutions whether your provider or broker registered, as required by Va. Code 6.2-2230, by November 1, 2022. Registration costs $1,000, renewable for $500 a year, and it automatically expires if not renewed by September 15.
Also check your signed disclosure form for what Va. Code 6.2-2231 requires: the finance charge, total repayment, payment amounts, fees and any broker compensation, on a separate SCC form that cannot contain false or misleading information. No APR is required. The law gives you no right to sue; the Attorney General enforces it under Va. Code 6.2-2238. Still, a missing registration or disclosure is negotiating leverage, and it can be reported.
Can a funder still use a confession of judgment or a New York court against you?
For any contract subject to Virginia's law, confession of judgment and out-of-state forum clauses are unenforceable under Va. Code 6.2-2234. Cases under the contract must be brought in Virginia, and "No sales-based financing contract shall contain any confession by judgment provision or any similar provision." Under Va. Code 6.2-2236, those provisions are severed and the rest of the contract remains in place.
This law does not apply to term loans, equipment financing, advances over $500,000 or bank products, and may not apply to a separate personal guaranty, though no published case we found has considered this. For these, Virginia's older confession of judgment law lets a creditor confess judgment against you in the clerk's office of any circuit court, even with no pending lawsuit. Va. Code 8.01-432. Read more about what a confession of judgment is and whether it's still legal.
What should happen in the first 21 days after a judgment is confessed?
If your funder confesses judgment, you or your attorney must file a motion to set aside or reduce the judgment within 21 days of receiving notice of its entry. Any ground you would have had if sued will do. Va. Code 8.01-433. The clerk can issue a writ of fieri facias 21 days after entry. Va. Code 8.01-466.
The instrument's confession of judgment notice must be in bold type of at least 8 point. Va. Code 8.01-433.1. The clerk must serve you within 10 days, and the judgment is void as to any debtor not served within 60 days. Va. Code 8.01-438. A New York judgment filed here is open to any Virginia defense. Va. Code 8.01-465.2. A settlement company that is not counsel of record cannot file this.
What are the Virginia exemptions for a guarantor?
The exemptions in Virginia are not as generous as some states, though "entireties" property may help you.
| What is protected? | How much? | Virginia Code section |
|---|
| Wildcard exemption | $5,000, or $10,000 if you are 65 or older, plus $500 per dependent | Va. Code 34-4 |
| Principal residence | Up to $50,000, claimed by recording a homestead deed in the land records | Va. Code 34-4 and 34-6 |
| Tools of trade and motor vehicles | Up to $10,000 each | Va. Code 34-26 |
| Wages | Lesser of 25% of disposable earnings or earnings above 40 times the higher of the federal or Virginia minimum wage | Va. Code 34-29 |
| Entireties property | Property held in "entireties" is immune from the separate creditors of one spouse | Va. Code 55.1-136 |
If the funder garnishes your bank account, you get notice and can request a hearing within 7 business days to claim exemptions. Va. Code 8.01-512.4.
How do you evaluate business debt settlement companies in Virginia?
Will they check whether your MCA is covered, whether the funder is registered and whether the disclosure form is complete? Will they calendar the 21 days? Can they help you find "entireties" property?
Be very suspicious of a company advertising that Virginia usury law can get your MCA thrown out, because Va. Code 6.2-317 excepts business loans of $5,000 or more. Some companies advertise the gross amount they "saved" a debtor, not the net after their fees. For fee structures, see how much business debt settlement costs.
Frequently Asked Questions
Does a business debt settlement company need to be licensed in Virginia?
No. Virginia only requires a debt settlement license for consumer debt settlement (Va. Code 6.2-2027), and a consumer is an individual who owes money "for personal, family, or household purposes" (Va. Code 6.2-2026). A business-only firm needs no license and won't appear in the SCC license lookup, so you have to investigate it yourself.
Can Virginia usury laws be used to invalidate a merchant cash advance in Virginia?
Probably not. Although Virginia usury laws cap interest at 12%, Va. Code 6.2-317 excepts business or investment loans of $5,000 or more, and almost any MCA converted to a loan would exceed that. Usury under the law your contract chose may help; ask an attorney.
Does the "no upfront fees" rule apply to business debt settlement?
No. The federal Telemarketing Sales Rule, which prohibits advance fees for debt settlement, exempts business to business calls. 16 C.F.R. 310.6(b)(7). Since the 2024 amendment, only its sections on misrepresentations and false statements apply to those calls.
Can the funder go after my house if I signed but my spouse did not?
If your house is titled in "entireties" and your spouse did not sign, the funder cannot reach it. Va. Code 55.1-136. A deed to you and your spouse without entireties language creates "moieties," which can be reached. Va. Code 55.1-135. Check your deed.