Cases concerning confessions of judgment gone bad are more common than not. A signed confession of judgment (COJ) confirms that the borrower is responsible for certain damages to the business loan account. For example, a defaulted merchant cash advance payment is a common trigger for lender to exercise a COJ. COJs are most common in when signing a Merchant Cash Advance agreement.
Your lender might have you sign a confession of judgment if you’re taking out a loan or making arrangements to repay one, Signing a COJ merits serious consideration before signing despite the fact that it may seem like a standard process. Before you committing to a COJ, it is important to understand the pros and cons associated with such an agreement.
IF YOU’RE CONSIDERING A CONFESSION OF JUDGMENT
Confessions of judgment can be very tricky as they favor the lender. Most importantly, a COJ permits the lender to enter judgment against the borrower without a lawsuit once certain conditions are breached. For example, if you default on a payment, it’s like pleading guilty to defaulting on a payment before you actually missed it. As such, the lender doesn’t have to prove you defaulted, because you’ve already “confessed.”
The lender can get a court judgment to collect providing notification to the borrower once a condition of a COJ is met. Furthermore, a lender can collect the amount due from any source of the borrower’s income without a lawsuit. Although it can be very difficult to dispute these actions in court when there is a signed Confession, it is not impossible.
IF YOU’VE DEFAULTED ON A CONFESSION OF JUDGMENT
Let us help you! Our business debt relief attorneys are well versed at dealing with Merchant Cash Advance lawsuits concerning confessions of judgment. There are many legal remedies available. Find out more by scheduling your free initial consultation.
BEFORE YOU SIGN, KNOW THE RISKS
When a creditor asks you to sign confession of judgment, don’t be convinced that it’s just a standard procedure. Even if you don’t anticipate breaching the agreement, it is still a powerful catalyst for collections through courts. It is important to keep in mind that your options for fighting or resolving the debt become fewer once it has been filed. There is a chance that you may miss the opportunity to defend yourself since you don’t have to be notified. Consider multiple options and lenders to avoid signing a COJ when possible.
HOW TO VACATE A CONFESSION OF JUDGMENT
In some circumstances, it may practical and legal to vacate a confession of judgment, particularly when none of the conditions of the COJ have actually been met. Another is if the COJ is facially insufficient, or doesn’t accurately reflect all the details. Also, compliant with NY CPLR 3218, COJs are invalid after 3 years from their signing.
Sometimes a borrower mays prove that a COJ was signed on faulty premises, like duress, overreaching, or fraud. However, a motion to vacate is not the right course of action in these cases. Accusations like these should only be used as defense in a separate plenary action.