South Dakota Business Debt Settlement and Merchant Cash Advance Lawyers
Running a small business is tough. Between managing employees, keeping customers happy, and trying to turn a profit, it’s easy to fall behind on bills or end up in debt. If you’re a South Dakota business owner struggling with debt, you have options. Debt settlement may help you resolve debt for less than you owe. Understanding the legal landscape can help you make the best choices.
An Overview of South Dakota Debt Settlement Laws
South Dakota has specific laws regarding debt settlement practices. The state Attorney General’s office oversees complaints about debt settlement companies operating illegally. So what practices are considered unlawful?
- Charging upfront fees before settling any debts
- Advising clients to stop communicating with creditors
- Making misleading claims about supposed “new government programs”
- Guaranteeing debt settlements that creditors won’t necessarily agree to
Reputable companies won’t engage in these shady tactics. But with so many debt settlement firms to choose from, it helps knowing what to avoid.The Attorney General also warns against companies that require lump sum payments upfront. Legal settlements should only require fees once debts have been reduced or resolved. Customers should also receive regular updates on progress.
Understanding Merchant Cash Advances
Many small businesses turn to merchant cash advances (MCAs) for quick capital. An MCA provides a lump sum in exchange for a percentage of future sales over a fixed term. It isn’t technically a business loan.Merchant cash advance companies don’t check credit scores or business profitability. Approval usually happens quickly. However, the repayment process works differently than a term loan.With an MCA, the lender takes a set percentage of daily credit card sales. This continues until the full amount plus a factor rate gets repaid. Factor rates often equate to 50-200% APR when calculated like interest.
South Dakota Usury Laws
South Dakota usury laws cap maximum interest rates lenders can charge. However, MCA companies using factor rates escape rate limits through legal loopholes.By technically selling future receivables instead of issuing loans, merchant cash advance companies don’t classify as lenders. So factor rates end up much higher than regulated interest rates.Usury laws aim to protect consumers and small businesses from predatory lending. But shrewd MCA contract structures bypass these protections. Critics argue that the practice exploits desperate business owners through misleading terms and exorbitant repayment costs.
The Risks of Debt Settlement
Debt settlement may seem like an easy fix, but it has serious downsides. Missed payments while saving for settlements can trash credit scores. Collection calls and lawsuits often ramp up during programs.The Attorney General warns that forgiven debt also counts as taxable income. Anyone settling $600 or more in consumer debt will receive a 1099-C form. This means owing income taxes on saved portions of settled balances.It takes diligent record-keeping to handle 1099-C forms properly. Otherwise the IRS can assess penalties and interest if taxes go unpaid on forgiven debts.
What to Ask Debt Settlement Lawyers
If you decide debt settlement makes sense, consulting a lawyer helps fully understand the consequences. Ask questions like:
- How much will I owe in taxes on forgiven debts?
- Will lawsuits or credit damage happen while settling debts?
- What recourse exists if the company fails to deliver?
- How long before I’m debt-free and what are total costs?
Reputable lawyers and debt settlement firms welcome tough questions. Doing homework protects against disappointment or unexpected outcomes.
Alternatives to Debt Settlement
Other options exist beyond debt settlement, including:
- Debt consolidation loans – Getting approved with poor credit is unlikely, but may provide lower interest rates.
- Non-profit credit counseling – Many offer free consultations and can negotiate reduced payments.
- Bankruptcy – Legal action eliminating some debts while allowing assets to be kept.
Most debt relief methods have pros and cons to weigh. Speaking with an attorney or financial advisor explores which path aligns best with your goals.
Finding the Right Help
Navigating business debt and cash flow problems feels overwhelming but you don’t have to tackle it alone. The right help puts you back in control.Seeking free consultations first lets you vet companies before committing. Comparing multiple perspectives helps make the most informed decision. With the right plan and support, South Dakota businesses can resolve debt and thrive again.
