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

Michigan paper decides Michigan outcomes. Seven statutes determine what a funder can file, what a collector can say, what price a contract can carry, and what a judgment can reach, and the owner who reads those sections before negotiating pays for substance rather than noise.

Security Interests Under MCL 440.9101

The short title provision of Michigan’s secured transactions article opens the regime that governs every blanket lien asserted over receivables, bank accounts, and proceeds. Creation, attachment, perfection, and priority all live within this article, and perfection typically arrives through a financing statement that describes the collateral with enough precision to identify what the filing actually claims. Steps taken, or left untaken, in the first weeks after demand determine the shape of the file.

Authorization decides the first dispute and the collateral description decides the second, while the enforcement and disposition rules that follow from this article dispose of everything remaining, usually against the party that filed first and read later. Counsel should review and analyze the filing record before answering the balance letter. An unauthorized filing is correspondence with a fee behind it, and correspondence settles for less than collateral does.

Prohibited Practices Under MCL 445.903

And the deception statute reaches further than its consumer label suggests. Section 3 of the Consumer Protection Act of 1976 declares unlawful a long catalogue of unfair, unconscionable, and deceptive methods in trade or commerce, from confusion as to source and false geographic designations to misrepresentations of characteristics and quantities, disparagement by false statement, bait advertising, false claims of price reduction, and representations that repairs or services are needed when they are not. A lending party that misstates balances, inflates its authority, or invents consequences in negotiations walks into these categories.

Protect and preserve the call notes, payoff quotes, and threat letters as one set. Remarks made to a collector, even casually, enter the record of the dispute.

Remedies Give the Prohibitions Their Price

Remedies give the prohibitions their price, and Section 11 of the same act states the figures. A person may seek a declaratory judgment and an injunction against continuance, and a person suffering loss may recover actual damages or $250, whichever is greater, plus reasonable attorney fees. Home solicitation violations carry a $5,000 floor with possible punitive damages, and residents may proceed as a class.

The section prices deception at actual loss or $250, whichever is greater, plus the fees required to prove it.

That cross reference is the bridge to federal enforcement, since the section anchors parallel claims in determinations under section 5(a)(1) of the FTC Act. Funders invoke the business scope limits in order to push business borrowers outside the act, so independent counsel ensures the claim fits the section before it is filed. The fee provision is extremely practical, since it funds the challenge that damages alone could not support.

Collection Conduct Under MCL 445.252

Collectors speak first and verify later, which is why the Regulation of Collection Practices Act of 1981 polices the conversation itself. The statute forbids misleading stationery, simulated process, misrepresented threats or rights, arrest threats it cannot effect, contact with a represented debtor outside proper channels, and employer disclosure without written authorization.

Threats of immediate levy or criminal referral belong on this list.

The collector held paper. The paper authorized nothing beyond a request. Collectors know the list. They prefer owners who do not.

Licensing Under the Occupational Code

Before any payment is discussed, before counsel has measured the filing, the owner should require proof that the collector may collect at all, and Article 9 of the Occupational Code supplies the test. Claims and debts arise from agreements for purchases primarily for personal, family, or household purposes, while collection agency status sweeps broadly across anyone collecting obligations owed to another, repossessors holding themselves out as agencies, and sellers of collection form systems. Banks collecting their own claims sit outside the definition, as do in house collectors. We ensure this check precedes any discussion of balances.

The personal purpose definition narrows the section, a peculiar result that funders cite in order to dismiss the licensing question entirely. Dismissal assumes the collector needs no license while the statute asks a different question, since section 445.252 bars employing an unlicensed person who must hold a license under this article. The response reviews the agency status, identifies the subsection, and constructs a demand citing both the gap and the conduct. Simply ask for the license number before discussing the balance. Most owners skip this check. I understand the delay.

Interest Law Begins With a Number

Interest law in Michigan begins with a number: $5 upon $100 for a year, with written stipulations permitted to 7 percent, as the legal rate section of 1891 provides. Corporate paper, obligations regulated elsewhere, and time price differentials on credit sales all sit outside the cap. There are exclusions, though in practice they tend to confirm the rule.

The cap frames usury analysis of factor rate pricing and personal guarantees, subject to those exclusions and to the characterization question whether the transaction is a loan or a purchase of receivables (the case law applying this section to purchased receivables repays separate research before anyone cites it). I have yet to see a funder concede the loan characterization without a fight, though the pricing keeps inviting the question.

Property Exempt From Execution

Within the enumerated categories, beyond the stated caps, little remains for a judgment to reach, and Section 6023 of the Revised Judicature Act draws those lines. Family pictures and apparel, household goods to $1,000, tools and business equipment to $1,000, disability and insurance benefits, and a homestead of 40 rural acres or one town lot with dwelling all stand exempt. The figures look modest until measured against an owner operated shop, where they are extremely material.

Exemptions set the arithmetic under every settlement discussion, since a creditor cannot extract through judgment what execution cannot seize. Resist the urge to acknowledge the full balance in order to buy quiet. Consult and contact Delancey Street, a settlement company rather than a law firm, for a confidential review of the accounts while independent counsel handles the legal questions. Michigan honors paper that reflects performance.