Pennsylvania Business Debt Settlement and Merchant Cash Advance Lawyers



Pennsylvania Business Debt Settlement and Merchant Cash Advance Lawyers

If you own a small business in Pennsylvania and are struggling with debt, you may be considering business debt settlement or merchant cash advances to find some financial relief. However, these options come with legal implications that business owners need to fully understand before moving forward.

That’s where working with a knowledgeable business debt attorney can help protect your interests. At Delancey Street, our legal team has extensive experience assisting Pennsylvania business owners explore their debt relief options, negotiate settlements, and resolve legal issues related to business debt.

In this article, we’ll overview Pennsylvania laws regarding business debt settlement and merchant cash advances, key things to know before signing any agreements, and how our legal services can help business owners through the process.

Pennsylvania Business Debt Settlement Laws

If you are considering debt settlement for your Pennsylvania business, it’s important to understand the state laws and regulations that may impact the process.

  • Pennsylvania does not have any specific statutes regulating business debt settlement companies. However, there are still some important legal considerations.
  • The Federal Trade Commission’s Telemarketing Sales Rule does apply. This requires debt settlement companies to make certain disclosures about their services.
  • Attorney-based debt settlement services may provide stronger legal protections than non-attorney companies. Our legal team handles all negotiations.
  • Fees for debt settlement services are not regulated under Pennsylvania law. Make sure to vet companies thoroughly and understand all fees.
  • There are tax implications to settled debt in PA, including possible state tax liability for savings. Consult a tax professional to understand how settlement may impact your business’s taxes.

While business debt settlement is not specifically regulated in Pennsylvania, working with a legal team that understands the nuances in state law can help business owners settle debt while protecting their interests.

Merchant Cash Advance Regulations in Pennsylvania

Merchant cash advances (MCAs) are a popular but often misunderstood funding option for small businesses. In Pennsylvania, MCAs are largely unregulated compared to other lending products. Here’s what Pennsylvania business owners need to know:

  • MCAs Are Not Considered “Loans” Under PA Law: MCA companies provide a purchase of future sales, not a loan with set repayment terms. This means MCAs escape regulations applied to bank loans and other regulated lending products.
  • No Limits on MCA Rates and Fees: Since MCAs are treated as purchases rather than loans, Pennsylvania does not cap interest rates or fees charged by MCA providers. Costs can vastly exceed rates for even high-interest credit cards or alternative small business loans.
  • Repayment Processes May Be Aggressive: MCA providers can claim very broad rights to access business accounts and withdraw repayments. You need to fully understand repayment terms before signing. Get legal guidance to protect your accounts.
  • Personal Guarantees Are Common: Often the business owner must personally guarantee an MCA. This puts your personal assets at risk for what is treated as a business purchase. Our lawyers can help limit guarantees when possible.

Because MCAs exist in a largely unregulated space in Pennsylvania, working with legal counsel is vital to protect your interests when pursuing this high-risk financing option.

Why Work with Business Debt Lawyers?

Navigating business debt relief options and their legal implications is complex. Having an experienced legal team guide you through the process can help in several key ways:

  • Negotiate Optimal Settlements: Our lawyers have successfully negotiated business debt settlements resolving over $100 million in commercial debt. We leverage our legal expertise to negotiate the maximum relief.
  • Ensure Compliance & Protect Against Lawsuits: Mistakes in the debt settlement process can leave businesses vulnerable to lawsuits. We ensure you remain compliant with state and federal law throughout the process to protect against legal exposure.
  • Defend Against Unfair MCA Terms: If considering an MCA, our team reviews agreements to flag unfair or deceptive terms and negotiates better terms when possible. We defend against aggressive repayment actions.
  • Limit Personal Liability: We work to limit owners’ personal guarantees whenever feasible to avoid putting personal assets at risk for business financial products.
  • Resolve Tax Issues: We partner with tax experts to minimize potential tax liability from cancelled debt while maximizing tax deductions available through debt relief programs.

At Delancey Street, our experienced legal team offers Pennsylvania business owners comprehensive support exploring debt relief options, negotiating settlements with creditors, and resolving related tax and compliance issues. We make the complex process of business debt resolution smooth, effective and legally sound. To discuss your situation with a member of our legal team, give us a call today at 212-210-1851.

Common Defenses Against Pennsylvania Business Creditors

If your Pennsylvania business is facing aggressive collections from creditors or lawsuits over unpaid debts, working with a business debt attorney can help equip you to mount strong legal defenses. Here are some of the most effective defenses our lawyers frequently employ:

Statute of Limitations Expiration

Debt collectors often try collecting aged business debts long after Pennsylvania’s statute of limitations has expired. The statute of limitations sets legal time limits on a creditor’s right to sue for payment. If the debt is time-barred, we can get collection calls and lawsuits dismissed.

Improper Service of Process

If a creditor sues your business over unpaid debts, strict rules govern how you must be formally served notice of the lawsuit. We scrutinize service of process and seek dismissals if documents were improperly served.

Unenforceable Contract Clauses

If a creditor tries enforcing questionable fine print terms that may be unenforceable under Pennsylvania law, we fight back. Our team identifies unenforceable clauses in credit agreements and gets them thrown out.

Inaccurate Credit Reporting

Inaccurate information on your business’ credit reports can hamper access to financing. We dispute errors with credit bureaus and demand corrections.

Rights in Bankruptcy

For qualified businesses facing unsustainable debts, bankruptcy may offer the best path forward. Our skilled bankruptcy attorneys help businesses file under Chapter 7 or Chapter 11 to eliminate qualifying debts and gain a fresh start.With seasoned legal guidance from our team, Pennsylvania small business owners can avoid unwarranted judgments and negotiate debt relief from a position of strength. To explore your options, contact our office today.

What Are the Tax Implications of Pennsylvania Business Debt Settlement?

Pennsylvania business owners who settle debts for less than what’s owed may wonder – how does cancelled debt impact my taxes? There are potential federal and state tax consequences that businesses should consider.

Federal Tax Rules on Cancelled Debt

The IRS generally considers any amount of debt forgiven over $600 as taxable income, unless certain exceptions apply. Common exceptions include:

  • Bankruptcy: Debt discharged in bankruptcy is not considered taxable income in most cases.
  • Insolvency: If your business is technically insolvent (liabilities exceed assets) immediately before settling debt, cancelled debt may not be taxed.
  • Mortgage Debt Forgiveness: Relief under the Mortgage Debt Relief Act for qualified mortgages avoids taxes on cancelled debt.

So unless an exception applies, your Pennsylvania business may face federal income taxes on settled debts.

State Tax Rules on Cancelled Debt

In Pennsylvania, cancelled debt is treated as taxable income for state tax purposes only if you claimed a tax deduction for the expense in a previous tax year.For example, if you deducted a $10,000 business loan as an expense on a prior Pennsylvania tax return, and then later settled the loan by paying just $4,000, you would owe PA state income tax on the $6,000 debt reduction.

Strategies to Minimize Tax Liability

The skilled tax accountants and CPAs in our network work with our legal team to employ strategies to reduce potential tax bills from settled business debts. For example:

  • Timely bankruptcy filings
  • Structuring settlements to maximize insolvency exceptions
  • Claiming deductions & credits to offset taxable income from cancelled debt

Determining possible tax implications from settling your Pennsylvania business’s debts can be complex. Our team partners with highly experienced tax professionals so you understand impacts and can minimize liability.

Could Legal Issues With Business Debt Settlement Be Lurking?

While business debt settlement can be an effective financial lifeline, Pennsylvania companies who enlist settlement services without legal guidance run major risks. An experienced business debt relief attorney can help you avoid the following legal pitfalls:Breach of Contract LawsuitsDebt settlement companies make big promises to slash debt, but often fail to deliver and leave customers vulnerable to lawsuits. Creditors argue breach of “good faith and fair dealing” clauses. Our lawyers ensure the process is legally sound.Violations of Federal & State Debt Relief LawsWell-meaning business owners can accidentally violate a host of state and federal debt relief regulations. We ensure you remain compliant.Tax Issues From Cancelled DebtAs outlined above, “forgiven” debt can mean tax bills. We partner with CPAs to minimize liability.Damage to Business Credit & Bankruptcy RiskFor high debt loads, settlement can negatively impact business credit. In some cases, bankruptcy becomes the better path. We guide businesses in choosing the right debt relief strategy.While business debt settlement lawyers cannot eliminate every risk, we can help Pennsylvania small business owners pursue settlements in a way that avoids unnecessary legal exposure. Our team stands ready to offer guidance and protection.

Ready to Address Pennsylvania Business Debt? We Can Help

If you are a Pennsylvania small business owner struggling with overwhelming business debts or aggressive collections from creditors and lenders, the experienced legal team at Delancey Street can help you regain solid financial footingContact us for a free consultation or call 212-210-1851 to learn more about how our comprehensive debt relief services can assist your business.

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