Business Debt Restructuring in Montana: 7 Laws That Change Your Leverage (2026)

The Montana Statute Your Funder’s Lawyer Would Rather Argue Around

Two different things get abbreviated MCA in this business, the Montana Code Annotated and the merchant cash advance itself, so this page names the code in full the first time and cites it by section number after that, and it calls the product an advance. The distinction matters here more than it does anywhere else, because Montana is one of a small handful of states whose general usury ceiling was never carved out for business borrowers. Montana Code Annotated §31-1-107(1) lets parties agree in writing to any rate that does not exceed the greater of 15 percent or 6 percentage points above the bank prime loan rate published in the Federal Reserve’s H.15 release three business days before signing, and the section says nothing at all about corporations, limited liability companies, loan size, or commercial purpose.

Read the exemptions and the reason funders avoid arguing this on the merits becomes obvious. Section 31-1-112(1) exempts regulated lenders, a term §31-1-111 fills with banks, savings and loan associations, trust companies, credit unions and similar supervised institutions, and §31-1-112(2) exempts a finance operation that finances transactions between merchants. An out of state funder wiring money into a Montana restaurant against its future card receipts is neither a supervised institution nor an obvious financier of merchant to merchant transactions, which is why the fight in a Montana file usually starts with a choice of law clause pointing somewhere friendlier rather than with the rate itself.

That fight has already been run to judgment once. In Cap Call, LLC v. Foster (In re Shoot the Moon, LLC), Adv. Proc. No. 2:17-ap-00028 (Bankr. D. Mont. Sept. 10, 2021), Judge Whitman L. Holt classified eighteen merchant agreements as loans rather than sales, refused to let a New York choice of law clause displace Montana usury law because that law is a fundamental policy of Montana under Restatement (Second) of Conflict of Laws §187(2)(b), and entered judgment for the chapter 11 trustee on the usury claim in the amount of $1,216,685. The other six bodies of law on this page run from that paper to your bank account: what a confession clause is worth here, what Montana never enacted about disclosure, how far back a creditor reaches for transfers, how a levy actually arrives, which unfair practices statute your company can use, and what a guaranty leaves you standing on.

1. The Confession Clause Signed at Funding Is Dead on Arrival

Montana has a confession of judgment chapter, and it is not the chapter your funding agreement is relying on. Section 27-9-101 permits a judgment by confession to be entered without an action for money due or to become due, but it opens with the words “Subject to 28-2-709,” and §28-2-709(1) provides that a written contract creating any promise to pay money may not contain a provision empowering any person to enter judgment by confession against a party, or empowering anyone as that party’s agent to confess judgment, accept service of process, or consent to entry of the party’s default. Such a provision, the statute says, is illegal and void and unenforceable in the courts of this state. There is no consumer carve out and no commercial exception in the section.

The second subsection is the one that decides real files. Section 28-2-709(2) defines “contract” to include all writings executed contemporaneously with and constituting a part of the same transaction, whether negotiable or nonnegotiable in form. A standalone affidavit of confession of judgment signed at the closing table alongside the merchant agreement is therefore part of the same contract for purposes of the ban, and so is the clause a few pages later appointing the funder’s designated agent to accept service on your behalf. Owners who have already been sued somewhere else routinely discover that the service they never received was made on an agent named in that clause.

What Montana does allow is narrow and looks nothing like the paperwork in a funding packet. Section 27-9-102 requires a statement in writing, signed by the defendant and verified by the defendant’s own oath, that authorizes entry of judgment for a specified sum and states concisely the facts out of which the debt arose in a way that shows the sum confessed is justly due or to become due. The clerk endorses judgment for the confessed amount with $45 in costs under §27-9-103. Nothing about that process can be completed in advance, because a sworn statement of facts showing a specific sum justly due cannot honestly be executed on the day the money is wired to you.

From the funder’s side of the table this changes the economics of a Montana file substantially. A funder holding enforceable confession paper in a state that permits it can convert a defaulted account into a judgment in days and start levying in the week after, and it prices settlements accordingly. A funder holding Montana paper has to file a complaint, serve it properly rather than through a clause the code voids, survive an answer that may put the sale or loan question and the usury penalty directly in issue, and only then reach your assets. If a judgment has already been entered against your Montana company on a confession, the entry itself is the argument, and it belongs with a Montana litigator immediately rather than after the appeal window closes.

2. Fifteen Percent, With No Entity Exemption Underneath It

The general Montana rate is 10 percent under §31-1-106 absent a written contract fixing something else, and the ceiling on what a written contract may fix sits at §31-1-107(1): the greater of 15 percent, or 6 percentage points above the bank prime loan rate published in the Federal Reserve’s statistical release H.15 dated three business days before the agreement is executed. The H.15 release dated August 3, 2026 carries a bank prime loan rate of 6.75 percent, which puts the formula alternative at 12.75 percent, so the operative Montana ceiling for an agreement signed this week is the flat 15 percent figure. Subsection (2) adds that a loan that was not usurious when made stays lawful for its duration unless substantially changed, and expressly excludes renewals from that protection.

The absence in this section is what matters. Ohio lifts its ceiling above $100,000 of stated principal and again for any enterprise carried on for profit, Kentucky forbids a corporation to plead usury at all, and Nebraska deletes its cap for any corporation, partnership or limited liability company. Montana does none of that. Section 31-1-107(3) removes only regulated lenders from the section, §31-1-111 defines that term to mean banks, savings and loan associations, trust companies, credit unions, consumer loan licensees, deferred deposit licensees, residential mortgage licensees and similar supervised entities together with their subsidiaries, and §31-1-112(1) then exempts those lenders from all usury limits while carving deferred deposit and consumer loan licensees back out of the exemption. Section 31-1-112(2) adds a finance operation that finances transactions between merchants as merchants are defined at §30-2-104. Whether a receivables funder advancing money to a single Montana operating company fits that merchant finance language is a real question that Montana appellate courts have not settled, and it is the question a funder wants argued last.

The penalty is the part that changes settlement numbers. Section 31-1-108(1) treats the taking, receiving, reserving or charging of a rate above what §31-1-107 allows as a forfeiture of a sum double the amount of interest the instrument carries or that was agreed to be paid, and §31-1-108(2) lets the person who paid the excessive interest recover a sum double the amount actually paid. Two conditions travel with that remedy and both get missed. The action has to be brought within 2 years after the interest was paid, and before any suit is filed the party bringing it must make written demand for return of the interest paid. The trustee in the Shoot the Moon litigation made that demand as to eleven Montana transactions, and the court treated it as the predicate it is.

The court in that case also confirmed how little the lender’s state of mind matters. Relying on Montana Supreme Court authority including Bowden v. Gabel, 105 Mont. 477 (1937), it held that a lender need not know a particular rate is usurious and illegal, and need only consummate a transaction charging a rate that is usurious in fact, then imposed the statutory penalty in its entirety after finding no equitable reason to soften it given the funder’s experience with merchants and its exclusive control over the documents. The effective rates the trustee’s expert calculated on those transactions ran from 82.7 percent at the low end to 175.13 percent at the high end. Against a 15 percent ceiling, that is the arithmetic that produced a seven figure judgment.

3. Nobody in Helena Licenses the Company That Funded You

As of August 2026 the Montana Code Annotated contains no commercial financing disclosure statute. No section requires a funder to hand your business a page stating the amount financed, the amount you actually received after fees, the total repayment obligation, the finance charge, or an estimated annual percentage rate, and no Montana agency registers small business finance providers or the independent sales organizations that place their paper. The current edition of the code is the Montana Code Annotated 2025, and the chapter indexes carry the point: Title 31 runs credit transactions, debtor and creditor relationships, related credit practices and litigation financing, and Title 32 runs banks, mutual savings and loans, credit unions, development corporations, consumer loan businesses, electronic funds transfer, escrow businesses and residential mortgage licensing. Commercial financing appears in none of them.

Montana also lacks the fallback that has carried three other states in this series. Iowa, Kentucky and Nebraska each enacted a loan broker act with an advance fee ban, criminal exposure and a private remedy reaching business borrowers, which gives a merchant something to file even where the funder itself is unregulated. Montana has no loan broker act and no credit services organization statute. The closest thing in the code is the wage broker licensing scheme at §§31-1-301 through 31-1-310, which regulates the purchase and assignment of an individual’s wages and has nothing to say about a company that sells receivables. The Division of Banking and Financial Institutions licenses mortgage brokers, lenders and servicers, consumer loan companies, sales finance companies, escrow companies and deferred deposit lenders, and issues no license a receivables funder or its broker would need.

One section in this area is frequently misread in a merchant’s favor and should not be. Section 31-1-116 bars a contract action against a regulated lender on an unwritten promise to lend money, extend credit, modify an existing credit agreement, or make a financial accommodation, and §31-1-116(2) defines a commercial loan for that purpose as credit extended primarily for commercial or business purposes in excess of $100,000. The section protects the bank, not you, and by its own terms it reaches only regulated lenders, so it has no application to the verbal assurances a funder’s representative gave you about renewals or about how reconciliation would work in practice.

The practical consequence is that leverage in a Montana file has to be built out of the transaction record rather than out of a regulatory defect. In a disclosure state a negotiator opens with a missing form the funder would rather not have papered. Here the productive questions are whether the agreement is a sale or a loan on its own terms and on the parties’ conduct, whether the effective rate crosses §31-1-107, whether the reconciliation obligation was ever honored, where each UCC-1 sits in priority under Montana’s Article 9 chapter, whether a broker took money before funding, and whether the payoff amounts sent to earlier positions match what actually reached your account. We walk through the lien side of that on our page about a UCC lien filed the same day the advance funded.

4. The Transfer Chapter Montana Never Renamed, and Its Longer Clocks

Much of the country adopted the 2014 revisions and started calling this body of law voidable transactions. Montana did not. Title 31, chapter 2, part 3 of the Montana Code Annotated is still cited by §31-2-326 as the Uniform Fraudulent Transfer Act, and the operative sections still speak of a transfer being fraudulent as to a creditor. A memo describing voidable transactions and citing sections in an unfamiliar numbering range is describing another state, and the vocabulary is a fast way to tell whether the person advising you pulled the right chapter before your restructuring plan was drafted.

The two tests sit at §31-2-333(1). Paragraph (a) reaches a transfer made or an obligation incurred with actual intent to hinder, delay or defraud any creditor, and applies whether the creditor’s claim arose before or after the transfer. Paragraph (b) requires no intent whatever: no reasonably equivalent value received, plus either remaining assets unreasonably small in relation to the business you were about to engage in, or debts you intended to incur or reasonably should have believed you would be unable to pay as they came due. Subsection (2) lists eleven factors a court may weigh on intent, and two of them describe workout conduct precisely: whether the transfer occurred shortly before or shortly after a substantial debt was incurred, and whether you transferred the essential assets of the business to a lienor who transferred them to an insider.

Section 31-2-334 adds the versions that need a creditor who was already there. Subsection (1) reaches a transfer for less than reasonably equivalent value made while you were insolvent or that made you insolvent, and subsection (2) reaches a transfer to an insider on an antecedent debt where you were insolvent and the insider had reasonable cause to believe it. Paying yourself back on an old member loan while four advances go unpaid is the second fact pattern, stated almost verbatim.

The deadlines are where Montana quietly departs from the uniform text, and the departure runs against the debtor. Section 31-2-341 terminates an actual intent claim under §31-2-333(1)(a) four years after the transfer or, if later, 2 years after it was or reasonably could have been discovered, where the uniform act allows one year for discovery. Constructive claims under §31-2-333(1)(b) and §31-2-334(1) get four years. The insider antecedent debt claim under §31-2-334(2) gets 2 years rather than the uniform one. Remedies at §31-2-339 run from avoidance to attachment against the transferred asset under Title 27, chapter 18, to an injunction, to appointment of a receiver, so an asset move made during a Montana workout is not merely reversible, it is a route to a receiver over property already in someone else’s hands. Date and value every distribution, member loan repayment and equipment sale of the last four years with counsel before any plan is drafted.

5. The Levy Lands Before the Letter Does

Montana has no separate post judgment garnishment chapter for a business operating account. A judgment creditor docketing a judgment gets a lien on your real property in that county under §25-9-301(2) from the moment of docketing, lasting 10 years unless the judgment is satisfied, and can extend that lien to any other Montana county by filing a certified transcript of the docket with that county’s clerk under §25-9-302. Everything else moves through a writ of execution. Section 25-13-501 makes all goods, chattels, moneys and other property not exempt by law liable to execution, expressly including debts and credits, and closes with the sentence that decides timing: until a levy, property is not affected by the execution.

The notice sequence is the part owners get wrong. Under §25-13-211(1) the sheriff or levying officer serves a notice of seizure on the judgment debtor within 5 days of seizure, not before it, and that notice may go by ordinary mail to your last known address with service complete on the date it is mailed. The money is gone first and the envelope arrives afterward. Section 25-13-212 then gives you 10 days, excluding weekends and holidays, from receipt of personal service or from the date of mailing, to file a written request for a hearing with a statement describing the property claimed as exempt, the reasons, and copies of the supporting documentation, mailed the same day to the creditor and to the levying officer. Miss that window and §25-13-212(2) says you may not claim an exemption in the seized property at all. The court then hears it within 10 days, again excluding weekends and holidays.

Two further tools belong in the same picture because they reach what a levy misses. Section 25-14-101 lets a creditor holding an unsatisfied execution compel you to appear and answer about your property, §25-14-103 reaches people who owe you money or hold your property and compels them to answer as well, and §25-14-107 lets the court order property applied to the judgment. Section 25-13-213 goes further into personal space, allowing a creditor whose writ came back unsatisfied to apply on affidavit for a warrant of execution authorizing entry into your residence. On the outside limit, §27-2-201(1) allows an action upon a judgment within 10 years and §25-13-101 ties the execution window to that same period.

The exposure that starts earliest is prejudgment, and it is aimed at guarantors by name. Section 27-18-101(1)(a) permits attachment in an action on a contract for the direct payment of money that is not secured by a mortgage or lien on real property, and §27-18-101(3) declares that the guaranty of a loan whose only condition precedent is default of the principal is an unconditional contract for the direct payment of money. A funder with a UCC-1 on personal property and an unconditional guaranty from you personally fits that description. The creditor must file the affidavit described in §27-18-202, including facts creating a reasonable belief that you are disposing of or able to conceal property, post an undertaking under §27-18-204 that is capped at $20,000, and under §27-18-205 make a prima facie showing at a show cause hearing on at least 3 days’ notice for personal property, or without notice on a specific record that delay would seriously impair the remedy.

6. One Definition in Section 30-14-102 Closes the Courthouse

The Montana Unfair Trade Practices and Consumer Protection Act begins broadly. Section 30-14-103 declares that unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are unlawful, §30-14-102(8) defines trade and commerce to reach the advertising, offering for sale, sale or distribution of any services or of any property, tangible or intangible, real, personal or mixed, wherever located, and §30-14-102(6) defines person to include corporations, trusts, partnerships and any other legal entity. Read that far and a Montana business owner reasonably concludes the statute is available. The exemptions at §30-14-105 do not disturb that impression, because they reach only conduct permitted under laws administered by the public service commission or the state auditor and the innocent republication of an advertisement.

The private action is where it closes. Section 30-14-133(1)(a) gives the damages claim to a “consumer” who suffers an ascertainable loss, and §30-14-102(1) defines a consumer as a person who purchases or leases goods, services, real property or information primarily for personal, family or household purposes. An advance taken by your trucking company against its future receipts is not a purchase for personal, family or household purposes, so the standing question is answered by a definition rather than by an exemption anyone has to plead. Montana courts have not needed to build a business exception, because the statute never let a business in.

The remedies you are reading about in general Montana consumer protection material therefore belong to somebody else, and it is worth knowing what you are not getting. A qualifying consumer recovers the greater of actual ascertainable loss or $500, may be awarded up to treble that loss at the court’s discretion where actual damages do not exceed $100,000, and may recover attorney fees limited to $250 an hour, although §30-14-133(3) makes that fee award available to the prevailing party in either direction and withholds it entirely once the consumer recovers $100,000 or more. The claim is individual only and cannot be brought as a class action, and it runs on the 2 year statutory liability period at §27-2-211(1).

Part 2 of the same chapter is not the escape hatch it looks like either. Section 30-14-222(1) does allow a person who is or will be injured to sue for an injunction and damages, and §30-14-222(2)(a) sets recovery at the greater of treble actual damages or $1,000, but the private right is expressly limited to violations of §§30-14-205 through 30-14-214 and 30-14-216 through 30-14-218, which are the restraint of trade, below cost selling, grain pooling and invoice alteration provisions. None of them describes a funder’s conduct. What a Montana business actually holds is breach of contract, fraud in the inducement, recharacterization and the usury penalty, the reciprocal attorney fee right at §28-3-704 discussed below, and a complaint to the Office of Consumer Protection, which can act under §30-14-111 and issue investigative demands under §30-14-113 without regard to whether you personally could sue.

7. The Homestead Montana Makes You File For

Once your guaranty becomes a judgment against you personally, the Montana exemption schedule is short and the cash line is missing from it. Section 25-13-608 exempts without dollar limit a set of things a business owner rarely has much of when the advances stop clearing, including prescribed health aids, social security and veterans benefits, disability benefits, deductible individual retirement account contributions made before the suit resulting in judgment was filed, unmatured life insurance contracts and a burial plot. Section 25-13-609 covers the working assets and caps them: $7,000 in aggregate and $1,250 per item in household furnishings, appliances, jewelry, apparel, books, firearms, animals, feed, crops and instruments; $4,000 in one motor vehicle; and $4,500 in aggregate in the implements, professional books and tools of your trade. There is no general wildcard, and there is no exemption for money in a bank account. Section 25-13-614 protects earnings at the lesser of 25 percent of disposable earnings or the amount by which weekly disposable earnings exceed 30 times the federal minimum hourly wage.

The house is governed separately and the mechanics are the actionable part. Section 25-13-615 sends you to Title 70, chapter 32, where §70-32-201 exempts the homestead from execution or forced sale, and §70-32-104(3) sets the value limit by directing the department of revenue to adopt administrative rules, fixing the 2021 figure at $350,000 and requiring a 4 percent increase every calendar year after 2021. Run that escalator forward and the 2026 limit is above $425,000, which makes Montana one of the more generous homestead states in the country, and well above the flat $5,000 a Kentucky guarantor stands on. Confirm the department’s published figure for the current year before relying on a specific number, because the statute makes the rule the operative source.

None of that value attaches automatically. Section 70-32-105 requires the person selecting a homestead to execute and acknowledge a declaration of homestead in the same manner as a grant of real property is acknowledged and to file it for record, §70-32-106 requires the declaration to state that the person is residing on the premises and claims them as a homestead and to describe the premises, and §70-32-107 requires recording with the clerk of the county where the land sits. An owner who assumed the protection ran with residency has no protection at all. Timing is not cosmetic either, because §25-9-301(2) attaches a docketed judgment only to real property that is not exempt from execution, and §70-32-202(3) subjects the homestead to forced sale on debts secured by mortgages executed and recorded before the declaration was filed for record.

The honest limit is what a declaration filed late accomplishes against a lien that already exists, and the answer is not a comfortable one. In J&L Lands, LP v. Nezat, 2022 MT 111, the Montana Supreme Court held that a judgment creditor could not be paid from sale proceeds until the debtor received the full value of his homestead exemption, and the homestead there had been declared before the lien the creditor was asserting ever arose. Recording a declaration today does not retroactively unwind a lien that attached yesterday, and moving to record one after a creditor is already in motion invites a look under §31-2-333. Where it does real work is before a judgment exists, which for most owners means now rather than after the summons. Ask Montana counsel to run the title and prepare it, and read our page on what a personal guaranty actually exposes alongside it. Where a creditor does execute on a declared homestead for an ordinary money judgment, §70-32-203 makes it apply to the district court for appointment of appraisers rather than simply selling, and §70-32-216 keeps traceable proceeds exempt for 18 months after a sale.

How a Montana Court Read a Funder’s Own Paperwork

The Shoot the Moon opinion is the most useful document a Montana merchant can read, because it works through eighteen agreements the way a judge does rather than the way a marketing page does. The court began from the premise that Montana looks to substance over form, citing Stanhope v. Shambow, 54 Mont. 360 (1918) and §1-3-219 of the code, and it observed that simply calling transactions sales does not make them so because labels cannot change the true nature of the underlying transactions. It then weighed a set of factors holistically, and the single item it described as weighing powerfully toward a loan was the scope of the security package.

That finding is something you can check tonight without a lawyer. One CapCall merchant agreement secured payment and performance obligations with a security interest in payment and general intangibles including tax refunds, patents, trademarks, service marks, copyrights, trade names, trade secrets, customer lists and licenses, plus goods, inventory, equipment and fixtures and all proceeds, and the corresponding UCC-1 financing statements usually described the collateral as all assets of the debtor, now existing and hereafter arising, wherever located. The court noted that filing a financing statement proves nothing by itself, since Article 9 covers sales of accounts as well as loans, but that a collateral package extending to a restaurant’s inventory, equipment and service marks has little relation to the accounts supposedly purchased, and exists to collateralize a payment obligation.

The court was careful about the other direction as well, and so should you be. It acknowledged that some of the agreements did contain reconciliation provisions and that none specified a fixed term, features other courts have relied on to find a true sale, and it recognized that a few factors favored the funder. It concluded that those features did not outweigh the loan like aspects of the documents and of the parties’ actual dealings, which included express negotiation of de facto terms for some transactions. A Montana file where reconciliation was genuinely available and genuinely used looks materially different from one where the clause sat unused while a fixed daily number cleared, and the difference is documentary. Pull the reconciliation requests you sent, the responses you received, every UCC-1 filed against your entity, and the guaranty, before anyone opines on what your file is worth.

When Montana Leverage Is Worth Buying, and When It Is Not

The honest version first, because a page that only sells does not help you decide. A single advance, a business still generating cash, and a funder already returning calls is a file most owners can work themselves, and paying anyone a percentage of a settlement that was available for the asking is a bad trade. The Montana facts on this page do not change that. What they change is the pricing of the harder files, the ones with three or four positions, daily debits consuming a third of gross revenue, a guaranty already demanded and a lawsuit either filed or a week away.

In those files the usury ceiling at §31-1-107 and the double penalty at §31-1-108 are not theoretical leverage, because a funder that has read the Shoot the Moon opinion knows a Montana entity is the wrong counterparty to litigate a recharacterization claim against. The reciprocal fee right at §28-3-704 cuts the same way, since the fee shifting clause the funder drafted for its own benefit becomes yours the moment you prevail, and a receivables desk that models litigation cost prices that in. Settlements on business debt commonly land somewhere between 30 and 60 cents on the dollar depending on the position, the age of the default and what the file will look like in front of a judge, and no honest firm will promise you a number before reading the documents.

Delancey Street is a business debt settlement company working with a nationwide network of licensed attorneys, and it is not a law firm. Negotiators handle the funders and the settlement structure, and attorneys within the network handle a Montana filing, a motion attacking a judgment entered on a confession, or a usury counterclaim where one belongs. Two decisions on this page are legal acts with consequences and should not be made from a search result: changing how the daily debits are paid, and recording a homestead declaration once a creditor is already moving. Take advice on both before you do either. Owners comparing options can start with our overview of how Montana merchant cash advance files get defended.

Who Should You Call? Our Top-Rated Business Debt Firms

One firm on this list works the entire lifecycle of a business debt file, from stopping the daily debits through attorney-led negotiation, UCC lien removal, and a signed release. The other two cover broader debt categories that often sit alongside the advances. Choose accordingly.