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

The Commonwealth Wrote One Sentence Nobody Else Would Write

Forty states have no commercial financing statute at all. Of the eleven that do, ten wrote a law that punishes the funder and leaves your contract untouched: Florida, Georgia, Kansas, Missouri and Utah all say in so many words that a violation does not affect the enforceability of the underlying agreement, and Texas, California, Connecticut, New York and Louisiana simply route everything through a regulator. Virginia went the other way. Section 6.2-2236 of the Code of Virginia says that if any provision of a sales-based financing agreement violates chapter 22.1, that provision is unenforceable against the recipient. Twenty-two words, and they are the reason a Virginia file is worth more than the same file in Maryland.

That does not make a Virginia advance easy to escape, and anybody who tells you otherwise is selling something. The chapter has exemptions wide enough to swallow a lot of deals, the disclosure duty falls on the provider rather than the broker who actually lied to you, and Virginia slammed the usury door on business borrowers back in 1987 and has never reopened it. Two of the seven items below are bad news you need before you spend money on the wrong argument.

We have ordered these by how fast you can act on them. The first four you can test this week, with nothing more than the funding agreement, the date you signed, and a public registry search. The last three take a lawyer and a longer look, and they matter most when the file has already reached a judgment or when somebody in the room has started asking what happens if the equipment moves.

1. The One Sentence in §6.2-2236 That Exists Nowhere Else

Read it in full, because it is short: “If any provision of a sales-based financing agreement violates this chapter, such provision shall be unenforceable against the recipient.” That is Va. Code §6.2-2236, enacted as part of 2022 chapter 516. Every other disclosure statute in the country gives the state a penalty and gives you nothing. Virginia gives you a defense you can raise in the funder's own collection case, without waiting for a regulator to act and without needing a private right of action written anywhere else in the chapter.

The practical reach of that sentence is narrower than it first looks, and it is worth being precise. It voids the offending provision, not automatically the whole agreement, so the argument is strongest where the defective term is the one the funder needs: a payment provision quoted without the finance charge disclosure §6.2-2231 requires, an arbitration clause that violates §6.2-2234(B), an out-of-state forum clause that §6.2-2234(A) declares unenforceable on its face. Where the violation is a missing broker compensation line under §6.2-2231(9), you are arguing about the consequences rather than about liability.

From the funder's side of the table this is not a lawsuit risk, it is an asset-quality problem. A Virginia file with a disclosure gap is a file that cannot be sold cleanly, cannot be assigned to a collection buyer at par, and cannot be taken to judgment without somebody on the other side raising §6.2-2236 in an answer. Portfolios get priced on how quickly paper converts. Ours is the business of making a funder do that math out loud, and the sentence above is usually the first thing we point at on a Virginia file.

2. Three Ways a Virginia Deal Falls Outside Chapter 22.1

Before §6.2-2236 is worth anything, the transaction has to be inside the chapter. Section 6.2-2228 defines sales-based financing as a transaction repaid over time as a percentage of sales or revenue, where the payment amount may rise or fall with volume, and it expressly reaches a true-up structure: financing repaid as a fixed payment but carrying a reconciliation process that adjusts the payment back to a percentage of sales or revenue. Almost every advance sold to a Virginia merchant is written in one of those two shapes, which is why funders litigate coverage rather than the definition.

Section 6.2-2229 sets out the three exits, and each one is worth checking against your own paperwork. A financial institution is exempt outright. So is any person, provider or broker that enters into no more than five sales-based financing transactions with a recipient in a twelve-month period. And a single transaction in an amount over $500,000 falls outside the chapter entirely, which means a large advance to a Virginia business gets no disclosure, no registration protection and no §6.2-2236 defense.

One coverage rule cuts hard in your favor. Section 6.2-2235 applies the chapter to providers and brokers offering, obtaining or making sales-based financing over the internet to or for a recipient, whether or not the company keeps any physical presence in the Commonwealth. A New York funder that has never sent anyone to Richmond is inside chapter 22.1 if your principal place of business is here. Coverage across all fifty states is laid out on our state-by-state disclosure map.

3. Registrations Die by Operation of Law Every September 15

Section 6.2-2230 required every sales-based financing provider and broker to register with the State Corporation Commission on or before November 1, 2022, and to obtain authority to transact business in the Commonwealth under Title 13.1 unless organized here. The application must disclose any judgment, memorandum of understanding, cease and desist order or conviction involving fraud, breach of trust or money laundering as to the company or any officer, director, manager or operator who controls it. That disclosure duty is why some funders quietly stopped soliciting Virginia merchants rather than file.

The renewal mechanics are unusually harsh and most people in this industry do not know them. The initial registration fee is $1,000 and the annual fee is $500, due by September 15 each year. Miss it and the statute does not create a grace period or a penalty schedule: the registration “shall automatically expire by operation of law.” A company that forgot a $500 payment in September is unregistered in Virginia in October, and it stays unregistered until it applies again.

Virginia also gave the Attorney General teeth that most states did not. Under §6.2-2238 the Attorney General may seek an injunction notwithstanding the existence of an adequate remedy at law, may seek damages and other relief including restitution to the extent available to borrowers, and is entitled to attorney fees and costs. Persons entitled to relief have to be identified by court order within 180 days of a permanent injunction, which is a real deadline if an enforcement action ever touches your funder.

4. Suit Has to Be Filed Here, and the Judgment Rider Is Dead

Section 6.2-2234 does three separate things and merchants usually only hear about one of them. Subsection (A) says any cause of action arising under a sales-based financing contract shall be brought in a court in the Commonwealth, and any provision requiring the action to be brought elsewhere is unenforceable. That kills the New York forum clause on a covered Virginia deal, which is a bigger practical win than it sounds: the cost and the discomfort of defending in Kings County is a large part of why merchants stop answering the phone.

Subsection (B) reaches arbitration. A contract with an arbitration provision may not require face-to-face proceedings outside the jurisdiction where your principal place of business sits, and if it does, that requirement is unenforceable. The provider also has to pay the arbitrators' fees and expenses and any administrative fees of the proceeding. Subsection (C) then states flatly that no sales-based financing contract shall contain a confession by judgment provision or any similar provision, and that any such provision is unenforceable.

Outside chapter 22.1, Virginia still permits confessed judgments generally, which is why the timing question matters. Section 8.01-432 lets a creditor or an attorney-in-fact confess judgment in a circuit court clerk's office with no suit pending, §8.01-433.1 requires a boldface warning on the instrument for anything signed after January 1, 1993, and §8.01-433 gives a debtor twenty-one days from notice of entry to move to set the judgment aside on any ground that would have been an adequate defense. Twenty-one days is not long. Someone should be reading the docket, not the mail.

5. Virginia Took the Usury Defense Away in 1987

This is the item that saves people money by stopping them from spending it. Virginia does have a rate cap: §6.2-303(A) says no contract shall be made for the payment of interest on a loan at a rate exceeding twelve percent per year except as otherwise permitted by law, and subsection (F) voids a contract made in violation, stripping the lender of any right to collect principal, interest, fees or charges. On paper that is one of the harshest usury remedies in the country.

Section 6.2-317 turns it off for almost everybody reading this page. No person may avail himself of the usury chapter, or any other statutory or case law relating to usury, to avoid or defeat the payment of interest in connection with a loan made for business or investment purposes if the initial amount of the loan is $5,000 or more. The section defines a business purpose as anything not for personal, family or household purposes, and says a passive or active investment does not count as a household purpose. Above $5,000 and funded into a business, the usury argument is gone before it starts.

What survives is worth knowing. Section 6.2-303(E) reaches a person who seeks to evade the twelve percent cap by device, subterfuge or pretense, including the pretended purchase or sale of goods or services, and the General Assembly showed in 2024 that it will legislate against a specific structure when it decides to: §6.2-303(G) declares that an inheritance advance entered into on or after July 1, 2024 is a loan and the extra amounts are interest. No Virginia statute does that to a merchant advance, and no Virginia appellate decision recharacterizing one turned up in the sources we could read. Treat it as an open question, not a plan.

6. Virginia Never Adopted the Uniform Transfer Act

Forty-some states run their fraudulent transfer analysis through a uniform act with a familiar badge list and a familiar four-year clock. Virginia does not. Section 55.1-400 voids, as to creditors, any gift, conveyance, assignment or transfer of estate, any judgment or execution suffered or obtained, and any bond or other writing given with intent to delay, hinder or defraud creditors, while protecting a purchaser for valuable consideration who had no notice of the fraudulent intent. That is an intent statute with no schedule of factors and no safe harbor for reasonably equivalent value.

Section 55.1-401 is the one that catches restructurings nobody thought were aggressive. A gift, conveyance, assignment or transfer not upon consideration deemed valuable in law is void as to creditors whose debts were contracted at the time it was made, whether or not anybody intended anything. Move an asset out of the operating company for nothing while an advance is outstanding and the transfer is voidable as to that creditor on its face. Intent is not an element, which is exactly backwards from the way most owners assume this works.

The clocks differ too. Section 55.1-402 lets a creditor bring the avoidance action before it has a judgment at all, and gives it a lien from the time the action is filed. Section 8.01-253 gives a voluntary-conveyance claim under §55.1-401 five years from recordation, or five years from when the transfer was or should have been discovered if it was never recorded. None of this is a roadmap for moving property away from a creditor and we are not writing one. It is the frame counsel uses to tell you whether something already done is a problem, and how long that problem lives.

7. The Consumer Protection Act Was Not Written for Your Company

Owners who have read about deceptive trade practices usually expect the Virginia Consumer Protection Act to be the vehicle. It rarely is. Section 59.1-198 defines a consumer transaction as the advertisement, sale, lease, license or offering of goods or services to be used primarily for personal, family or household purposes, plus a short list of specific additions: business opportunities sold to an individual who has not previously engaged in them, employment-finding services, layaway agreements, sales to a church or religious body, and certain legal advertising about nursing home inspections. A working capital advance to an operating company is none of those things.

The definition of “person” in the same section is broad enough to include a corporation, so the gap is not about who you are. It is about what the transaction was for. Funds drawn to make payroll and buy inventory are used for business purposes, and the same business-purpose line that closes §6.2-317 closes the VCPA. Where a case has genuinely consumer-facing conduct in it, that is a different conversation, and it is a conversation to have with a lawyer rather than to assume.

What is left is a narrower but more honest list. A §6.2-2236 unenforceability defense on a covered transaction. Common law fraud or constructive fraud where a broker made a specific misrepresentation about cost or term. Breach of the reconciliation promise as an ordinary contract claim, which is where most of these files actually live. And regulatory exposure under §6.2-2238, which does not pay you but does change what the funder is willing to accept. If those are the tools, Virginia counsel who works these files is the person to bring in, and our Virginia defense page covers how that engagement usually runs.

After Judgment: What a Virginia Creditor Reaches, and What It Does Not

Garnishment in Virginia runs off the lien of a writ of fieri facias. Under §8.01-511 the creditor sues out a summons in garnishment from the clerk, serves the garnishee and then serves you promptly afterward, and the summons has to carry the exemption notice and claim form §8.01-512.4 requires. For a company, the target is the operating account, and the first that many owners learn of it is a declined payroll run. The pattern of warnings that usually precedes it is set out on our page about the thirty days before a freeze.

On the personal side, §34-29 caps wage garnishment at the lesser of twenty-five percent of disposable earnings for the week or the amount by which those earnings exceed forty times the higher of the federal or Virginia minimum hourly wage. Section 34-4 gives a householder a $5,000 exemption in property of their choosing, $10,000 if they are sixty-five or older, plus $500 for each dependent, plus $50,000 in real or personal property used as a principal residence. Those figures are adjusted for inflation on April 1, 2027 and every three years after, so check the current number rather than this page if the date has passed.

The provision that changes a guarantor's position most is §55.1-136. Spouses may hold real or personal property as tenants by the entirety for as long as they are married, personal property qualifies whether or not it came from the sale of real property, and subsection (C) preserves the same immunity from the claims of separate creditors when entireties property is conveyed into joint or separate revocable or irrevocable trusts, subject to the conditions the statute lists. A judgment against one spouse alone does not reach entireties property. A judgment against both does, which is why funders name the spouse on the guaranty whenever they can.

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.