Texas Business Debt Settlement: 5 Issues That Now Deserve a Closer Look

The Texas agreement deserves a fresh reading before the owner accepts another payment arrangement, particularly where sales-based financing is being treated as though its regulatory setting never changed.

Business debt settlement remains a negotiation about specific obligations. Texas HB 700 adds relevant questions for covered MCA transactions, but its scope and remedies should be examined rather than converted into a promise that every debt disappears.

1. Identify Whether Chapter 398 Applies

HB 700 added Finance Code Chapter 398 and took effect September 1, 2025. The enacted text addresses commercial sales-based financing, including qualifying internet transactions serving Texas recipients even when the provider has no local office.

Exemptions matter. Banks and certain other entities or transactions are excluded, and an ordinary business loan should not be assumed to fall within the same framework because repayment is difficult.

Ask counsel to identify the product, parties and relevant dates. Simply referring to every withdrawal as an MCA does not establish the statute's application.

The final enacted law also differs from earlier bill versions. Use the enacted text when discussing its requirements, especially the disclosure threshold.

2. Examine Disclosures and Debit Authority

For covered specific offers below $1 million, the enacted statute requires disclosures addressing financing, disbursement, finance charges and repayment, along with specified additional information. Refinancing an existing obligation can require disclosures concerning amounts retained to address that balance.

Those records can help an owner compare the amount advertised with the cash received and the payments required. A discrepancy should be documented and assessed; it should not be silently replaced with the figure from a sales presentation.

The adopted 2026 rules explain that automatic deposit-account debits require a validly perfected first-priority security interest in all the recipient's accounts receivable. That requirement is more specific than a claim that Texas banned every automatic payment.

Counsel should review and analyze the actual security position. The presence of a filing does not itself answer every question concerning perfection, priority or the rights described in the agreement.

Section 398.055 also addresses contracts containing confession-of-judgment provisions. Before regarding a clause as harmless boilerplate, obtain advice about coverage and the legal consequence of the provision.

These are extremely useful negotiation questions, though they are legal questions first. Counsel should ensure any asserted violation is supported and ensure deadlines remain protected while it is examined.

3. Delancey Street for Settlement Assessment

Delancey Street offers a free confidential initial review focused on MCA distress, with legal matters coordinated through independently licensed counsel. It is a debt settlement company rather than the lawyer appearing in a Texas proceeding.

Confirm debt eligibility, service scope and fees. The review can help establish whether an affordable negotiated proposal fits the business's position.

A statutory question and a settlement budget belong in the same assessment without being confused.

4. Prepare the Offer From Operating Capacity

List necessary expenses and the receipts available to support a payment. Include existing obligations until there is written confirmation that their terms have changed.

A creditor may accept a smaller amount without accepting the schedule the business needs. Read both together and determine whether a missed installment restores the original claim or creates other consequences.

Resist the urge to offer the entire visible account balance in order to finish the call. Payroll and tax obligations can remain invisible to the counterparty while being unavoidable for the owner.

The forecast may contain uncertainty. Identify it, especially where the proposal depends on a customer paying earlier than usual.

5. Require a Complete Written Resolution

The settlement should identify the parties, covered obligations and release conditions. Personal guarantees and security interests deserve separate attention rather than an assumption that payment resolves every related right.

The IRS explains that canceled debt can create income, subject to exceptions and exclusions. Assess the proposed result after fees and relevant tax treatment before describing the reduction as final savings.

A negotiated agreement can be extremely valuable when it creates obligations the business can perform. It does not acquire that quality through a favorable percentage alone.

Delancey Street's initial review provides a starting point for the MCA settlement inquiry, with legal interpretation entrusted to counsel. The objective is a supported agreement whose practical effect remains clear after the pressure that produced it has passed.