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

Michigan Is the Rare State Where the Rate Question Is Still Live

Nearly every page in this series delivers the same disappointing news about interest rates: the state has a usury statute, and a business-purpose or entity-type exclusion takes a commercial advance straight out of it. Michigan is the exception worth reading carefully. The legislature did write a business exemption in 1970, but it wrote two versions of it in the same section, and the version that applies to a lender that is not a bank keeps a ceiling in place rather than removing it.

That distinction sits in a single clause at the end of MCL 438.61(3), and most people who talk about Michigan usury never get that far down the page. It matters because a merchant cash advance funder is emphatically not a state or nationally chartered bank, a savings bank, a savings and loan association, a credit union, an insurance carrier or a finance subsidiary of a manufacturing corporation, which is the list that gets the unlimited version in subsection (2).

There is a counterweight in the Business Corporation Act that pulls the other way, and the interaction between the two is genuinely unsettled rather than something a page like this can resolve for you. What follows sets out both provisions accurately, tells you where the argument is open, and then works through the five other Michigan rules that determine what a creditor here can actually reach.

1. The Twenty-Five Percent Line a Non-Bank Funder Never Got Out Of

Michigan’s baseline is unusually low. MCL 438.31, from Act 326 of 1966, sets the interest of money at five dollars upon one hundred dollars for a year and then permits the parties to stipulate in writing for any rate not exceeding seven percent per annum. Two years later the legislature added Act 259 of 1968, and MCL 438.41 makes a person guilty of criminal usury who, not being authorized or permitted by law to do so, knowingly charges, takes or receives interest at a rate exceeding twenty-five percent simple interest per annum or the equivalent rate for a longer or shorter period, punishable by imprisonment for up to five years or a fine of up to ten thousand dollars, or both.

Act 52 of 1970 is the business exemption, and it is titled exactly that: exemption of loans to business entities from usury statute. MCL 438.61(1)(a) defines a business entity as a corporation, trust, estate, partnership, cooperative or association, or a natural person who furnishes the extender of credit a sworn written statement specifying the type of business and the business purpose for which the proceeds will be used. That last branch has a condition worth flagging for any sole proprietor: the exemption does not apply if the extender of credit has notice that the person signing the sworn statement was not engaged in the business the statement indicated.

Then the section splits, and this is the whole point. MCL 438.61(2) provides that in connection with an extension of credit to a business entity by a state or nationally chartered bank, a state or federal chartered savings bank, a state or federal chartered savings and loan association, a state or federal chartered credit union, an insurance carrier, a finance subsidiary of a manufacturing corporation, or a related entity as defined in subsection (1)(b), the parties may agree in writing to any rate of interest. Subsection (3) covers everybody else, and its language is different: in connection with an extension of credit to a business entity by any person other than those institutions, the parties may agree in writing to any rate of interest not exceeding the rate allowed under Act 259 of 1968.

Act 259 of 1968 is the criminal usury act, and the rate it allows is twenty-five percent simple per annum. So on the face of the Michigan statute book, a funder that is not one of the listed regulated institutions and that extends credit to a Michigan business entity is authorized to agree in writing to a rate up to twenty-five percent and no further. Whether your particular agreement is an extension of credit at all, or a genuine purchase of receivables that never lent anything, is the threshold argument the funder will make, and it is decided on the reconciliation terms and the allocation of risk in your document rather than on the label at the top of page one. Our page on how reconciliation provisions fail in practice covers the evidence that argument runs on.

2. The Corporate Waiver That Pulls in the Opposite Direction

Before anyone gets comfortable, there is a second provision that cuts the other way, and honest advice has to put it in front of you. MCL 450.1275, part of the Business Corporation Act of 1972, provides that a domestic or foreign corporation, whether or not formed at the request of a lender or in furtherance of a business enterprise, may by agreement in writing, and not otherwise, agree to pay a rate of interest in excess of the legal rate, and that the defense of usury shall be prohibited.

Two details in that sentence are worth noticing. The phrase “and not otherwise” means the waiver has to rest on a writing, so an oral modification or a course of dealing does not carry it. And the section is aimed at corporations rather than at every business form, which raises a real question about how it applies to a limited liability company, a partnership or a sole proprietor with a sworn statement, each of which is a business entity under MCL 438.61(1)(a) but is not a corporation under the Business Corporation Act.

The larger question is how MCL 450.1275 interacts with the ceiling in MCL 438.61(3) and with the criminal provision in MCL 438.41, which by its own terms reaches a person who charges above twenty-five percent while not being authorized or permitted by law to do so. Those provisions can be read together in more than one way, and this page could not confirm a controlling Michigan appellate decision resolving the question, so we are not going to pretend the answer is settled. What we can tell you is that the argument exists on the statutory text, that it is worth raising with Michigan counsel on your actual numbers, and that a funder’s collection lawyer would rather resolve a file than litigate the point. That is what the leverage consists of here, and it is more than a merchant gets in most states.

3. Michigan Adopted the Voidable Transactions Act and Borrowed Its Deadlines

Michigan is on the modern side of this divide. Act 434 of 1998 was renamed by 2016 PA 552, effective April 10, 2017, and MCL 566.31 and following now carry the Uniform Voidable Transactions Act. The vocabulary is voidable rather than fraudulent, and a memo about your restructuring that uses the older phrasing and cites a chapter 1336 or a chapter 109A was written for Ohio or Massachusetts.

MCL 566.34(1) sets the two tests. Paragraph (a) reaches a transfer made or obligation incurred with actual intent to hinder, delay or defraud any creditor, whether the claim arose before or after. Paragraph (b) needs no intent: no reasonably equivalent value received, plus either remaining assets unreasonably small for the business or transaction you were engaged in or about to engage in, or debts you intended or believed or reasonably should have believed you would incur beyond your ability to pay. Subsection (2) lists the badges a court weighs on intent. MCL 566.35(1) adds the insolvency version for a creditor whose claim already existed, and MCL 566.35(2) reaches a transfer to an insider on an antecedent debt where the debtor was insolvent and the insider had reasonable cause to believe it. MCL 566.35(3) puts the burden on the creditor to prove those elements by a preponderance of the evidence.

The deadlines are where Michigan departs from nearly every other state on this list, and it is the detail most likely to be gotten wrong by an out-of-state adviser. MCL 566.39 does not state a four-year period. It extinguishes a claim under MCL 566.34(1)(a) or (b) or 566.35(1) unless action is brought within the time provided in MCL 600.5813 or MCL 600.5855, which are the general six-year period for other personal actions and the fraudulent concealment provision allowing two years from when the claimant discovers or should have discovered the claim or the identity of the person liable. A claim under MCL 566.35(2), the insider antecedent-debt transfer, must be brought within one year of the transfer.

Six years is a materially longer look-back than the four-year rule most of this industry works from, which changes what an honest restructuring plan has to account for. One further definitional point matters here: MCL 566.31(b)(iii) excludes from the definition of an asset an interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant. The traps in this area are laid out on our page about OldCo and NewCo transfer problems, and none of it is a reason to move anything before Michigan counsel has dated and valued it.

4. After Judgment, a Michigan Judge Can Hand Your Company to a Receiver

The provision that decides outcomes in Michigan post-judgment practice is MCL 600.6104, and its breadth surprises people who expect a garnishment writ and nothing more. After a money judgment has been rendered in any court of this state, the judge may, on motion in that action or in a subsequent proceeding, compel discovery of any property or things in action belonging to the judgment debtor and of anything due to the debtor or held in trust for the debtor; prevent the transfer of any property, money or things in action or their payment or delivery to the debtor; order satisfaction of the judgment out of property, money or other things in action, liquidated or unliquidated, that are not exempt from execution; appoint a receiver of any property the debtor has or may afterward acquire; and make any order the judge considers appropriate to carry out the full intent of subjecting the debtor’s non-exempt assets to the judgment.

Read that list as a sequence rather than as options. The discovery power produces the asset picture, the transfer restraint freezes it, and the receivership power puts a court appointee between you and your own operating assets. It is a motion in the case that already exists rather than a new lawsuit, and the statute expressly allows proceedings under the chapter even where execution may not issue and other enforcement steps are unavailable. For an owner still running the business, a receiver is the outcome that ends the business, and it is the reason a Michigan judgment is worth resolving rather than absorbing.

Garnishment runs alongside it under MCL 600.4011, which gives the court power to apply to the satisfaction of a claim evidenced by contract, by a judgment of this state, or by a foreign judgment, personal property belonging to the debtor but in the possession or control of a third person subject to Michigan jurisdiction where the property is within the state. The reference to a foreign judgment matters in this industry, because the judgment your funder obtained in New York does not have to be relitigated here to start reaching a Michigan bank account.

Two clocks frame the exposure. MCL 600.5809(3) allows an action founded on a judgment of a Michigan court of record, or of a court of record of the United States or another state, to be brought within ten years of rendition. MCL 600.5807 gives six years for an action for damages or money due for breach of contract that is not otherwise specified, so the underlying agreement itself carries a six-year window. And MCL 600.6013 governs interest on the money judgment, which accrues over that decade and is frequently a larger number than the amount the parties were arguing about at the start.

5. Nothing in the Compiled Laws Made Your Funder Show You a Number

For all the rate protection described above, Michigan sits with the majority on the disclosure side. Eleven United States jurisdictions had a commercial financing disclosure or broker statute in force as of August 2026 and Michigan is not one of them. Nothing required your funder to state the amount financed, the amount disbursed after fees and payoffs, the total repayment, the dollar cost of the money or an estimated annual percentage rate before your business signed, and no Michigan agency registers or licenses small business finance providers or the brokers who shop their applications.

The absence is worth naming precisely because it is the opposite of what people assume from the rate rule. A Michigan borrower can have a genuine statutory ceiling argument and still have no disclosure claim at all, and the two do not substitute for each other. Where a disclosure state gives a negotiator a documented regulatory defect to open with, Michigan gives arithmetic, and arithmetic requires the funding statement, the payment history and a clear view of what was actually disbursed against what was actually collected.

So the Michigan file is built on numbers. Pull the funding-day settlement statement showing what was withheld and what was sent to prior positions, the complete debit history including every returned payment and the fees charged for it, and any written promise about reconciliation or renewal. Those documents let counsel compute what the money actually cost against the twenty-five percent line, which is a more useful hour of work here than in any other state on this list. Our comparison of the eleven jurisdictions that do regulate disclosure shows what Michigan chose not to enact.

6. The Consumer Protection Act Stops at the Household Door

Owners regularly ask about the Michigan Consumer Protection Act, and the answer is in the definitions rather than in an exemption anyone has to argue. MCL 445.902(1) defines trade or commerce, for purposes of Act 331 of 1976, as the conduct of a business providing goods, property or service primarily for personal, family or household purposes, including the advertising, solicitation, offering for sale or rent, sale, lease or distribution of a service or property, tangible or intangible, real, personal or mixed, or any other article, or a business opportunity.

A merchant cash advance to your machine shop or your staffing agency is not a business providing something primarily for personal, family or household purposes, so the conduct never enters the statute’s definition of trade or commerce and the analysis ends there. That is the same structural result Ohio reaches through its own definitions, and it is the mirror image of Massachusetts, where a separate section was written specifically to give a business plaintiff a claim.

The one place the act’s vocabulary brushes against this industry is the business opportunity definition in MCL 445.902(1)(a), which reaches sales or leases of products, equipment, supplies or services intended to enable the purchaser to start a business where the seller makes specified representations about locations, repurchase, guaranteed income or a marketing program. A working capital advance to an operating business is not that, and stretching the definition to fit is not a strategy. In Michigan the live claims are breach of contract, common law fraud in the inducement, and the recharacterization and rate arguments in the first two items, which is where the effort belongs.

7. Three Thousand Five Hundred Dollars, and Why the Bankruptcy List Is Different

The Michigan exemptions that apply to an ordinary execution are at MCL 600.6023(1), and the figures have not moved in a very long time. Subsection (g) exempts a homestead of not more than forty acres with the dwelling house and appurtenances outside a recorded plat, city or village, or at the owner’s option not more than one lot within a recorded plat, city or village with its dwelling and appurtenances, owned and occupied by a Michigan resident, not exceeding three thousand five hundred dollars in value. Subsection (b) protects household goods, furniture, utensils, books and appliances to one thousand dollars. Subsection (e) protects the tools, implements, materials, stock, apparatus, team, vehicle, motor vehicle, horses or harness needed to carry on the profession, trade, occupation or business in which the person is principally engaged, also to one thousand dollars.

Those numbers are not typographical errors, and they are the reason a Michigan guarantor facing a state court execution is in a materially worse position than a guarantor in Washington or Arizona. Subsection (g) does contain one protection with real teeth for a married debtor: a mortgage on the homestead is not valid for purposes of the exemption without the signature of a married judgment debtor’s spouse, subject to a purchase-money exception and a twenty-five year recording rule. Subsection (j) exempts individual retirement accounts and annuities under Internal Revenue Code sections 408 and 408A along with payments and distributions from them, with a limitation on contributions made near the filing.

The contrast that matters strategically is MCL 600.5451, which is a separate and more generous list available only to a debtor in bankruptcy, with amounts the state treasurer adjusts rather than leaving frozen in the statute. A Michigan guarantor’s exemption position therefore depends heavily on which forum the fight ends up in, and that is a decision to make deliberately with counsel rather than by default after an execution has already issued.

The last piece is tenancy by the entireties, which Michigan recognizes and which does real work here. MCL 557.71 gives a husband and wife equal rights to the rents, products, income or profits and to the control and management of real or personal property held as tenants by the entirety, and MCL 566.31(b)(iii) confirms the creditor-side consequence by excluding entireties property from the definition of an asset under the voidable transactions act to the extent it is not subject to process by a creditor holding a claim against only one tenant. As everywhere, both spouses signing the guaranty dissolves the protection, which is why a guaranty presented for a second signature deserves its own conversation.

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.