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

The Ceiling Nobody Told You Was Still Standing

Most of the country solved the usury problem for commercial lenders forty years ago by writing a business entity exemption into the statute, so that whatever ceiling exists on paper evaporates the moment the borrower is an LLC rather than a person. Rhode Island did not do that. The ceiling at R.I. Gen. Laws §6-26-2 applies to any person, partnership, association or corporation loaning money to another, with a single commercial escape hatch that almost nobody in this industry satisfies, and the penalty section that follows it does not reduce the rate or forfeit the interest the way a dozen other states do. It voids the contract.

That word does a different job than the remedies most states settled on. Under §6-26-4(a) every contract made in violation of §6-26-2, together with every mortgage, pledge, deposit or assignment given as security for it, is usurious and void, and under §6-26-4(c) a borrower who has made payments on the contract, of principal or of interest or of any part of either, is entitled to recover what was paid. The Rhode Island Supreme Court has described the legislative approach as an inflexible one that operates close to strict liability, has refused to let a usury savings clause rescue a lender who exceeded the ceiling, and has twice now held commercial loans void where the lender missed a statutory condition it assumed was a formality.

None of that is automatic, and the honest version has to come before the pitch. The ceiling governs loans, your funder will insist it bought receivables rather than lent money, and we could not locate a Rhode Island appellate decision applying §6-26-2 to a merchant cash advance in either direction. What that means practically is that the recharacterization question is worth more here than in almost any other state, because the payoff for winning it is not a rate adjustment but a dead contract. The other six bodies of law on this page decide what happens on the days when that argument is still unresolved: what your funder can do to your bank account, how far back a creditor reaches for money you moved, which statute your company is allowed to sue under, and what is left standing behind your personal guaranty.

1. The Confession Ban Written for Somebody Else

Rhode Island has no cognovit chapter, no warrant of attorney statute, and no procedure in title 9 or title 10 for entering a judgment on a clause you signed at closing. The General Laws address the device in one place, R.I. Gen. Laws §19-14.1-1, which provides that no lender or loan broker shall take any confession of judgment, or any power of attorney, except a power of attorney or power of sale that lets the holder enforce a chattel mortgage or pledge after a default in principal or interest. The same section bars taking a note or security that fails to disclose the actual amount of the loan, the time for which it is made and the agreed rate, and bars any instrument with blanks left to be filled in after execution.

Read that on its own and it looks like the strongest anti-confession language in New England. Then read §19-14.1-10(b), which provides that the provisions of chapter 14.1 and of chapter 14 shall not apply to loans to corporations, joint ventures, partnerships, limited liability companies or other business entities, to loans over $25,000 to individuals for business or commercial rather than personal purposes, or to loans principally secured by accounts receivable or business inventory. Your advance is at least one of those three and usually all three at once, so the confession ban, the blank instrument ban and the disclosure duty in §19-14.1-1 all pass over the transaction without touching it. The provision exists to protect consumer borrowers from finance companies, and a funder placing paper with a Providence staffing agency is standing outside the doorway the statute guards.

The practical consequence is that a Rhode Island funder rarely bothers with a confession clause, because the clause is worth very little in a state whose courts have almost no practice under it, and the paperwork instead points at New York. That is where the real exposure sits. A New York confession of judgment entered against your company travels here under chapter 9-32, the Uniform Enforcement of Foreign Judgments Act, where a filed foreign judgment is treated the same as a Rhode Island judgment and is enforced the same way. If your agreement recites New York law, New York venue, and an affidavit of confession, the fight over whether that judgment can be entered belongs in New York, and it belongs there fast.

Two mechanics in chapter 9-32 are worth knowing before the envelope arrives. Section 9-32-3(a) and (b) require the creditor to file an affidavit with your last known address and require the clerk to mail you notice of the filing, and §9-32-3(c) provides that no execution or other process for enforcement of a filed foreign judgment shall issue until 20 days after the date the judgment is filed. Section 9-32-4 then lets the court stay enforcement where an appeal is pending or has been taken, or on any ground that would stay a Rhode Island judgment, on the security the rendering state or this state requires. Those 20 days are the only structural pause built into the process, and they run whether or not anybody reads the mail. Our page on Rhode Island MCA defense covers what goes into that window.

2. Twenty-One Percent, and a Penalty That Voids Everything

R.I. Gen. Laws §6-26-2(a) provides that no person, partnership, association or corporation loaning money to or negotiating the loan of money for another, pawnbrokers excepted, shall directly or indirectly reserve, charge or take interest at a rate exceeding the greater of 21% per annum or the alternate rate in subsection (b), computed on the unpaid principal balance of the net proceeds of the loan, not compounded, not taken in advance, and not added on to the amount of the loan. Subsection (b) defines the alternate rate as nine percentage points plus the domestic prime rate published in the Money Rates section of The Wall Street Journal on the last business day of the month preceding the agreement or the redetermination. With prime at 6.75% on the Federal Reserve H.15 release dated July 31, 2026, the alternate rate computes to 15.75%, which means the 21% figure is the live ceiling and will stay the live ceiling until prime crosses twelve.

The one commercial escape is narrower than the industry assumes. Section 6-26-2(e) removes the limit for a loan to a commercial entity where the amount loaned exceeds $1,000,000, where repayment is not secured by a mortgage against any borrower’s principal residence, and where the commercial entity has first obtained a pro forma methods analysis performed by a certified public accountant licensed in the state of Rhode Island indicating that the loan is capable of being repaid. Both of the Rhode Island Supreme Court’s modern usury decisions turn on that last condition. In NV One, LLC v. Potomac Realty Capital, LLC, 84 A.3d 800 (R.I. 2014), the loan cleared a million dollars and touched no residence, and the lender still lost the exemption because it never obtained the analysis. In Commerce Park Realty, LLC v. HR2-A Corp., 253 A.3d 1258 (R.I. 2021), the borrowers certified that an analysis had been done when none had, and the lenders charging 34% and 26% got nothing from a certification that described nothing.

What follows a violation is the part that changes settlement arithmetic. Section 6-26-4(a) makes every contract made in violation of §6-26-2, and every mortgage, pledge, deposit or assignment given as security for it, usurious and void. Section 6-26-4(c) entitles the borrower to recover from the lender any payment made on the contract, of principal or of interest, before or after suit, whether paid to the lender or to an assignee. The forfeit-the-interest-only rule most states use does appear here, but only in §6-26-4(d) and only for a regulated financial institution: a bank, credit union, bank holding company or other entity regulated by the department of business regulation forfeits the entire interest and faces a claim for twice the usurious interest paid, brought within two years. A merchant cash advance funder is none of those things, which puts it under subsection (a) instead.

Two more sections raise the stakes before the honest limits arrive. Section 6-26-3 makes a willful and knowing violation of §6-26-2 criminal usury punishable by up to five years, and §§6-26-9 and 6-26-10 make possession of records evidencing a usurious debt a separate offense, with possession itself treated as presumptive evidence of knowledge. Section 6-26-2 speaks only to loaning money, and your funder will argue that it purchased future receivables at a discount and made no loan at all, an argument that succeeds where the reconciliation obligation is genuine and the risk of nonpayment truly sits with the buyer. We could not locate a Rhode Island appellate decision resolving that question for a merchant cash advance, so a settlement number quoted on the assumption of certain voidness is a hope with a decimal point. Whether a Rhode Island court would decline a New York choice of law selection because §6-26-4 states a fundamental public policy is a question for counsel on your facts, not a settled rule. Our overview of criminal usury exposure explains why the analysis here rarely stays purely civil.

3. No Disclosure Chapter, No License Your Funder Needs

As of August 3, 2026, the Rhode Island General Laws contain no commercial financing disclosure statute. Title 6 runs from the trade name chapter through chapter 6-62 on veterans’ protection without a commercial financing chapter anywhere in it, and title 19 runs from the definitions chapter through chapter 19-34 on elder financial exploitation without one either. No Rhode Island agency requires your funder to hand you a page stating the amount financed, the amount you actually receive after fees, the total payback, the finance charge or an estimated annual percentage rate. Eleven jurisdictions in the country impose some version of that duty, and this is not one of them. Anyone telling you that a missing disclosure invalidates your Rhode Island advance is quoting New York, California or Virginia law and has not checked whether it travels.

The licensing picture reads the same way once you follow it through. Section 19-14-2(a) does require a license to make or fund loans, to act as a lender or small loan lender, or to broker loans or act as a loan broker within this state, and §19-14-1(12) defines a loan broadly enough to include any advance of money or credit while §19-14-1(13) defines a loan broker as anyone who for compensation solicits, processes, negotiates, places or sells a loan here for others in the primary market. Section 19-14-26(a) backs that with civil penalties up to $5,000 for each day a person engages in unlicensed activity. Then §19-14.1-10(b) removes loans to business entities, business purpose loans over $25,000 to individuals, and loans principally secured by accounts receivable or inventory from the reach of both chapters. The independent sales organization that cold called your bookkeeper and collected a point on funding needs no Rhode Island license to do it.

Several states with no disclosure law still hold a loan broker act in reserve that reaches commercial paper, with advance fee bans and felony exposure attached, and business owners in those states have a real statutory claim against the broker even when they have none against the funder. Rhode Island is not one of them. The chapter exists, the definitions are wide enough, and the exemption at §19-14.1-10(b)(1) closes it before it can be used. That absence is worth understanding rather than mourning, because it tells you exactly where a Rhode Island file gets its leverage instead: from the usury ceiling that other states gave away, from the four corners of the agreement, and from the transaction record.

So the work moves to documents. Whether the reconciliation provision was requested and honored or quietly ignored, whether the funder followed its own default and acceleration terms before declaring the full payback due, where each UCC-1 sits in priority on the secretary of state’s index, whether a broker collected money before funding, whether the payoff amounts wired to prior positions match what those funders actually released, and whether the effective rate on the money that reached your account clears 21%. That last question is the one a Rhode Island funder least wants answered in writing, and it is available to you here precisely because the legislature never wrote the business exemption that most states did.

4. Voidable, Not Fraudulent, and Three Different Deadlines

The vocabulary is the fastest way to tell whether the memo in front of you was written for this state. Rhode Island adopted the Uniform Voidable Transactions Act in 2018 through P.L. 2018 ch. 141 and ch. 236, and §6-16-12 now gives chapter 6-16 that short title. Nothing in the operative sections says fraudulent transfer any more, the tests speak of a transfer being voidable as to a creditor, and §6-16-4(c) and §6-16-5(c) assign the creditor the burden of proving the elements by a preponderance of the evidence, which the older Rhode Island act did not spell out. An adviser still citing a fraudulent conveyance standard and a clear and convincing burden is working from a version of chapter 6-16 that the General Assembly replaced eight years ago.

The tests themselves are the familiar pair, and both reach an owner who reorganizes in a hurry. Section 6-16-4(a)(1) covers a transfer made or obligation incurred with actual intent to hinder, delay or defraud any creditor, and it protects creditors whose claims arose before or after the transfer. Section 6-16-4(a)(2) requires no intent at all: no reasonably equivalent value received, plus either remaining assets unreasonably small for the business you were about to conduct or debts you believed or reasonably should have believed you could not pay as they came due. Subsection (b) then lists eleven factors on intent, the last of which reaches a debtor who transferred the essential assets of the business to a lienor who transferred them to an insider, and §6-16-2(b) presumes insolvency where a debtor is generally not paying debts as they become due outside a bona fide dispute.

Section 6-16-5 adds the versions available to a creditor whose claim already existed. Subsection (a) reaches a transfer for less than reasonably equivalent value made while the debtor was insolvent or that caused the insolvency, and subsection (b) reaches a transfer to an insider on an antecedent debt made while insolvent where the insider had reasonable cause to believe it. Paying yourself back on a shareholder loan, or clearing a family member’s note, while four advances go unpaid is the subsection (b) fact pattern precisely, and it carries the shortest deadline in the chapter. The remedies at §6-16-7 run from avoidance to the extent needed to satisfy the claim, to attachment or another provisional remedy against the transferred asset or other property of the transferee, to an injunction, to appointment of a receiver, and §6-16-7(b) lets a judgment creditor levy execution on the transferred asset or its proceeds where the court so orders.

One provision does real work in a multistate file and gets missed constantly. Section 6-16-13 supplies a governing law rule: a claim of this kind is governed by the local law of the jurisdiction where the debtor was located when the transfer was made, and the section locates an organization at its single place of business or, with more than one, at its chief executive office. If your company runs out of Warwick and moved equipment to an affiliate in Massachusetts, the applicable transfer law is decided by where your chief executive office sat that month, not by where the truck went. Build the transfer timeline with dates, values and counterparties before anyone drafts a restructuring plan, and have counsel paper each move in advance rather than explain it afterward, because the difference between those two sequences is usually the difference between a defensible transaction and an avoidance action.

5. An Attachment Here Requires a Judge First

Rhode Island runs collection on the old New England machinery of attachment and trustee process, and the single most useful thing to know about it is that the front door has a hearing on it. Section 10-5-2(a) provides that a court may authorize a plaintiff to attach a defendant’s assets after hearing on a motion to attach, that the motion must state the day, time and place of the hearing, and that a copy must be served on the defendant or left at the last and usual place of abode at least five days before the fixed hearing date. There is no ex parte freeze of a business operating account in this state on the strength of an affidavit, which is the opposite of what an owner who has read about New York restraining notices expects. Section 10-5-7 describes what the writ can command: goods and chattels, real estate, and personal estate in the hands of any person, partnership or corporation as trustee, which is the category your bank falls into.

After judgment the machinery speeds up without changing shape. The final proviso in §10-5-2(c) allows a plaintiff whose claim has been reduced to judgment to attach the defendant’s personal and real estate and to use trustee process under chapter 10-17 in the same action in which the judgment was entered, so no new case is required. Chapter 10-17 is the garnishee machinery: §10-17-2 and §10-17-4 require the trustee to file an account of what it holds, §10-17-7 fixes the amount with which the trustee is charged, and §10-17-15 exposes a garnishee that fails to render an account to an action by the plaintiff. Section 9-26-30 then supplies the rule that decides who gets paid in a stacked file: the creditor who first procures an attachment for a just debt is satisfied before any other demand, and the rest follow in order of attachment.

Real estate works differently from most states and the difference favors an owner who is paying attention. A Rhode Island judgment does not become a lien on your land the moment it is docketed. Under §9-26-14 the officer serving the execution files a copy of it, with the doings and a description of the property, with the recorder of deeds or the town or city clerk where the land lies, and §9-26-15 provides that the filing constitutes a good and sufficient levy. Until somebody takes that step, the judgment is a piece of paper with a docket number, and §9-26-33 discharges a recorded levy against real estate twenty years from the date of the judgment. Section 10-5-46 dissolves an attachment of real estate on the same twenty year horizon.

Three clocks and one rate govern how long any of this can follow you. Section 9-25-3 permits an execution, original or alias, to issue within six years from the rendition of the judgment or from the return day of the last execution, which means a creditor who keeps issuing executions renews its own six year window indefinitely. Section 9-1-17 allows an action on a judgment for twenty years. Section 9-21-8 provides that every judgment for money draws interest at 12% per annum to the time of its discharge, and §6-26-1 sets the same 12% as the legal rate in business transactions where no different rate is stipulated. Meanwhile §9-28-3 gives the creditor a citation practice: after an execution comes back unsatisfied, you are required to contact the creditor’s attorney within 25 days to establish a payment agreement, and failing that the district court sets a hearing at which it can order the judgment paid in full or by installments.

6. Chapter 6-13.1 Was Written for Household Buyers

Chapter 6-13.1 looks written for you until you reach the private action section. Section 6-13.1-1(3) defines person to include corporations, trusts, partnerships, incorporated and unincorporated associations and any other legal entity, and §6-13.1-1(6) lists the unfair methods and deceptive acts, including representing that services have characteristics, uses or benefits they do not have, representing that services are of a particular standard or quality when they are of another, making false or misleading statements about the reasons for or amounts of price reductions, and a catchall for other practices that mislead members of the public in a material respect. Every one of those describes a sales call an owner in default remembers vividly.

Section 6-13.1-5.2(a) is where it ends. The private action belongs to any person who purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers an ascertainable loss, and that person may recover actual damages or $500, whichever is greater, with treble damages available in the court’s discretion and fees and costs under subsection (d). A working capital advance taken by your LLC to cover payroll is not a purchase for personal, family or household purposes under any reading of that sentence. The definition of person in §6-13.1-1(3) tells you who can be sued under the chapter, not who is allowed to sue, and conflating the two is the most common mistake we hear from Rhode Island callers who have read the statute themselves.

The exemption in §6-13.1-4 is how defendants escape when a plaintiff does have standing, and Rhode Island reads it broadly. Subsection (a) provides that nothing in the chapter applies to actions or transactions permitted under laws administered by the department of business regulation or any other regulatory body or officer acting under state or federal statutory authority. In Chavers v. Fleet Bank (RI), N.A., 844 A.2d 666 (R.I. 2004), applying the framework from State v. Piedmont Funding Corp., 119 R.I. 695, 382 A.2d 819 (1978), the Court asked first whether the general activity is monitored and regulated by a governmental agency and then put the burden on the plaintiff to show the specific acts fall outside, and it held credit card solicitations by a national bank squarely within the exception because the Comptroller of the Currency oversees compliance. A funder that is regulated nowhere has a harder time with that argument than a bank does, which is a genuine both-directions point rather than a comfort.

One 2021 change matters for how the chapter is read now and it is easy to misstate. P.L. 2021 ch. 206 and ch. 329 added §6-13.1-4(b), which provides that for actions brought by the attorney general the exemption applies only if the person claiming it shows both that its business activities are subject to state or federal agency regulation and that the conduct complies with the orders, rules or statute that agency administers. That tightening runs to the attorney general’s cases alone and leaves the broad Piedmont reading in place everywhere else. So the realistic route for a Rhode Island business with a documented misrepresentation is a complaint to the attorney general, who can seek an injunction under §6-13.1-5 and civil penalties of up to $10,000 per violation under §6-13.1-8, while your own claims sit in breach of contract, fraud in the inducement and the usury and recharacterization theories that carry the real money on this page.

7. A $500,000 Homestead and a $500 Bank Account

Once a guaranty turns into a judgment against you personally, two Rhode Island sections decide what a creditor can reach, and they point in opposite directions. Section 9-26-4.1(a) creates an estate of homestead to the extent of $500,000 in the land and buildings, or personal property, that the owner uses as a residence, and it does so automatically by operation of law with no declaration, deed recital or other documentation required. That is one of the largest homestead figures in the country and it is roughly sixteen times the $31,575 federal homestead at 11 U.S.C. §522(d)(1). Rhode Island has not opted out of the federal schedule, so a filer can elect either set, and for a homeowner the state list is usually the obvious choice.

The exceptions are where guarantors get hurt, and two of them are specific to this situation. Section 9-26-4.1(a)(2) excludes from homestead protection a debt contracted prior to the acquisition of the estate of homestead, which matters because the estate arises when you occupy the property as your principal residence rather than when you file anything: guarantee an advance in March and buy the house in September and the sequence is working against you. Section 9-26-4.1(a)(7) excludes a debt owing to a federally insured deposit-taking institution or to a person regulated or licensed under title 19, and subsection (b) repeats that the section does not apply to a debt owing to a regulated institution, to a debt secured by a mortgage or other voluntary lien, or to a mechanics’ lien under chapter 34-28. An unlicensed commercial funder sits outside that carve-out, which is one of the few places in this analysis where being unregulated hurts the funder.

Everything else on the personal side is thin. Section 9-26-4(18) exempts savings or other deposits held in a banking or financial institution only to $500. Working tools necessary in your usual occupation are exempt to $2,000 under (2), along with the professional library of a professional in actual practice. Household furniture, clothing and family stores run to $9,600 under (3), motor vehicles to an aggregate $12,000 under (13), jewelry to an aggregate $2,000 under (14), and books in use in the family to $300 under (4). Individual retirement accounts under (11) and ERISA-protected plans under (12) are protected with the usual domestic relations carve-outs. The additional $6,500 wildcard at (16) is available only to a debtor in bankruptcy by its own terms, so it does nothing at all against a state court execution.

Two more mechanics finish the picture. The wage figure printed in §9-26-4(8)(iii) is $50, a number that has not moved in generations, and in practice the operative restriction on garnished earnings is the federal ceiling in 15 U.S.C. §1673 rather than the state figure, so confirm with counsel what a Rhode Island writ can actually capture before you plan around either number. And Rhode Island recognizes tenancy by the entirety, which is why §6-16-1(2)(iii) excludes from the definition of asset an entireties interest to the extent it is not subject to process by a creditor holding a claim against only one tenant, and why §9-26-33 carves out a levy against only one spouse in entireties property from its twenty year discharge rule. A guaranty signed by one spouse and a guaranty signed by both are different exposures, and funders ask for the second signature for precisely that reason. Our page on challenging a personal guarantee covers what to do when the second signature is already there.

The Receivership Statute Rhode Island Passed in 2022

Rhode Island has a long tradition of using Superior Court receiverships where other states use chapter 11, and in 2022 the General Assembly modernized the framework with the Rhode Island Commercial Receivership Act at chapter 10-21, enacted by P.L. 2022 ch. 107 and ch. 108 effective June 20, 2022. Section 10-21-4(a) applies the chapter to a receivership for an interest in real property and related personal property, or in personal property and fixtures, with subsection (b) keeping ordinary owner-occupied residences out unless the property is used commercially or generates rents. Section 10-21-4(d) preserves the court’s authority to appoint a receiver under other law, so the chapter supplements the older equity practice rather than replacing it.

Two provisions do the heavy lifting for a business trying to buy time. Section 10-21-14(a) makes an order appointing a receiver operate as a stay against all persons of any act to obtain possession of, exercise control over, or enforce a judgment against receivership property, and against enforcement of a lien securing a prepetition claim, with the court empowered under (e) to void an act taken in violation and under (f) to award actual damages, fees and costs and to sanction a knowing violation as civil contempt. Section 10-21-9 gives the receiver the status of a lien creditor under Article 9 as to personal property and fixtures and under §34-13-2 as to real property, which is the hook for attacking an unperfected security interest that a funder assumed nobody would test.

Three limits belong next to that description. Section 10-21-14(d) exempts from the stay any act to perfect or continue perfection of an interest in receivership property, criminal proceedings, a governmental unit enforcing police or regulatory power, establishment of tax liability, and the exercise of rights under swap, securities, repurchase, commodity, forward and master netting agreements. A receivership is also a public, court-supervised process in which control of the business passes out of your hands, which is a different proposition from a Subchapter V case where the debtor stays in possession under a $3,424,000 debt cap for cases filed on or after April 1, 2025. Compare the two with counsel on the numbers rather than on the vocabulary, because the right answer depends on whether your problem is a lien fight, a cash problem, or an ownership problem.

How These Seven Fit Together in an Actual Rhode Island File

The sequence matters more than the inventory. The first work on a Rhode Island file is arithmetic rather than argument: pull the funding wire and every deduction taken from it, total the payback obligation, and compute the effective annual rate against the net proceeds the way §6-26-2(a) measures it, because that number decides whether this file has a statutory theory or only a commercial one. The second piece of work is a UCC search and a read of each agreement’s reconciliation and default provisions, because the recharacterization question that unlocks §6-26-4 is answered by how the reconciliation clause actually operated rather than by what it says.

The third is a calendar. Every transfer out of the company in the last four years gets dated and valued against the three windows in §6-16-9, every judgment and foreign judgment filing gets diaried against the twenty day bar in §9-32-3(c) and the six year execution window in §9-25-3, and any attachment motion gets a note of the five day service requirement in §10-5-2(a) so that the hearing is not the first time your side speaks. The fourth is honest triage on the guaranty: what the homestead in §9-26-4.1 actually covers given when you acquired the home, and what §9-26-4 leaves outside it.

There are files where none of this justifies hiring anyone. One advance, cash available to close it, a funder already returning calls and a rate under the ceiling is a file an owner can often settle without help, and a settlement company that signs that owner up anyway has put its own enrollment ahead of the outcome. Where it changes is at three or four positions, a daily debit consuming a third of gross revenue, a rate that clears 21% on the money you actually received, and a funder that has stopped answering. At that point the file has both leverage and a deadline, and the two do not stay aligned for long.

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.