Confession of Judgment: The Clause Every Debtor Should Know!

Are you wondering what confession of judgment really means? If yes, then you have come to the right place. In simple terms, a confession of judgment is a written agreement that the defendant signs.

This is a clause in a contract that accepts the liability and amount of damages that both parties agreed upon in the trial. In this article, I will discuss all elements associated with confession of judgment.

What Is A Confession Of Judgment?

Before you go into the details, let us understand the concept of confession of a judgment. A confession of judgment (COJ) is a legal document that is an agreement that enables a lender to avoid a lawsuit. Similarly, it also allows obtaining a court-ordered judgment to begin the collection on debt after a loan has defaulted. 

On the other hand, COJ is also a legal device, which is a clause in a contract. In such a contract, a clause remains where the debtor agrees to allow a creditor to acquire a judgment against the debtor. Moreover, this is only during the nonoccurrence of payment and often without any advised warning or notice. 

Similarly, such clauses might require the debtor to waive their right to assert any defense against the entry of judgment. Or be represented by an attorney hired by the creditor. 

On the other hand, confessions of judgment tend to be controversial. They are regularly challenged on the grounds of the facilitation of predatory lending practices, along with violations of due process rights. 

What is the Purpose of Confession of Judgment?

You must be wondering about the purpose of a confession of judgment. As you know by now, a confession of a judgment is a written statement signed and verified by the defendant through oath. These papers are submitted to the court through the clerk for entry. 

Moreover, it can also be entered in any court having jurisdiction over the total amount involved. Similarly, the judge signs the judgment specifying the principal due, interest accrued, and the cost incurred by the creditor. 

The primary purpose of the confession of judgment is that once it has been executed, the COJ will be kept by the plaintiff. Moreover, it will not be utilized or filed with a court of law. Moreover, this will only apply when the specific payments have already been made. 

If so, the confession of judgment might be returned to the defendant, unfiled, beginning when the debtor has completed all payments. 

On the other hand, if the payments are not made on time or as agreed, the lender or the creditor can feel that they can use the COJ to get filed through courts. This will allow the plaintiff to use all the available tools to collect judgment, similar to an entirely held trial. 

Usage Of Confessions Of Judgement

There are a variety of uses for confession of judgment, like levying your bank accounts and seizure of assets. Moreover, the confession of judgment also can act as a lien on receivables and property. 

In various situations, an aggressive bank account levy is completed successfully without any warnings. Due to this, your bank account will not notify you before your banking account is frozen or emptied. 

Moreover, if you do business or have a personal banking account in the state of New York, you’ll observe that the plaintiff has already swiped up your bank account. This means the moment the confession of judgment has been signed into a court order, the judgment will make your accounts be swiped off within a couple of days after the judge’s order. 

Similarly, the state of New York has been a state that has primarily utilized confession of judgment. Due to this, most creditors tend to conduct their business in this location. Section 3218 of New York’s Civil Practice Law & Rules (CPLR) allows confessions of judgments to be filed within the state. 

Moreover, you will also observe that many inconsistencies were observed after the investigation by the New York Marshall’s Office for abusive collection activities. Similarly, the investigation showcased how the office benefited financially from its overly aggressive collection strategies. 

In other words, the strategies used by the New York Marshall’s Office had been beneficial for MCA businesses. The whole process also made headlines across the state. This led to the amendment of CPLR 3818 in 2019 as a remedy for the abuse that was going on. Similarly, this amendment also restricted the usage of confession of judgment for residents and businesses domiciled in New York.

How Does a Confession of Judgment Work?

A Confession of Judgment (COJ) might sound like legal jargon, but understanding this concept is essential, especially if you’re a debtor or business owner dealing with debts.

A COJ is a legal agreement where a debtor agrees in advance to allow a creditor to take legal action against them without needing a trial.

It’s typically used when there is a loan or credit agreement, and the debtor might have difficulty making repayments.

By signing a COJ, the debtor authorizes the creditor to obtain a judgment against them if they default on the debt.

In simpler terms, if the debtor fails to pay, the creditor can go straight to court and ask for a judgment without needing to prove the debt in front of a judge.

This clause can seem like an easy way out for creditors. Still, it’s important to know that once the court issues a judgment, it could lead to wage garnishments, liens on property, and other severe consequences.

So, understanding the full impact of a COJ is crucial before signing any agreement that contains this clause.

What Should a Confession of Judgment Have?

A confession of Judgment is not a one-size-fits-all clause. You must include certain elements to ensure that it’s both legal and fair.

These elements protect both the creditor and the debtor and help make the process as transparent as possible. Here are some of them that you need to know about:

Clear and Specific Terms:

The COJ should clearly define the debt, including the total amount owed, interest rates, payment schedule, and the specific events that would trigger the confession.

It should outline all terms of the loan or credit agreement, such as repayment deadlines and consequences of default. This way, there is no confusion about what happens if the debtor fails to pay.

Acknowledgment of Debt:

The debtor must acknowledge the debt and agree to the possibility of a judgment that the lender has entered against them.

This is often the core of the COJ: the debtor consents to a judgment if they fail to meet the agreed-upon payment terms.

Waiver of Notice:

In many cases, the COJ includes a waiver of notice, meaning the debtor agrees to forfeit the right to be formally notified before the creditor obtains a judgment.

This can be particularly concerning for debtors, as it means they won’t necessarily have a chance to defend themselves before legal action is taken.

Voluntary Signing:

For the COJ to be valid, the debtor must sign it voluntarily. No one can force or coerce it. The debtor must clearly understand the implications of signing the document.

This is why experts often recommend legal counsel before signing any agreement with a COJ.

Court Approval (In Some Jurisdictions):

Some jurisdictions require that you should file a COJ in court for approval. This step is meant to protect the debtor.

This is because it ensures that the terms are fair and no one coerced the debtor into signing. However, this isn’t the case in all regions, so it’s important to understand local laws.

Things to Keep in Mind While Signing Confession of Judgment

While a COJ can seem like a way to resolve a debt issue quickly, there are several important things to keep in mind before signing on the dotted line:

Know the Risks:

The biggest risk of a Confession of Judgment is that it allows creditors to bypass the usual legal process. Once you sign, you agree that the creditor can get a judgment against you without trial.

If you default on the loan, they can immediately begin wage garnishment or put liens on your property.

Seek Legal Advice:

If a COJ is part of an agreement that someone has asked you to sign, consulting with a lawyer is wise.

A legal professional can help you understand the terms and the potential risks involved, ensuring you’re fully aware of the consequences.

In some cases, your lawyer may even be able to negotiate a more favorable agreement for you.

Consider Your Financial Situation:

Before agreeing to a COJ, carefully assess your financial situation.

If there’s a chance you might not be able to repay the debt, signing a COJ could lead to serious financial problems in the future.

If you’re uncertain about your ability to keep up with payments, explore other options, such as restructuring the debt or negotiating a settlement.

Ensure Fairness:

Ensure that the COJ’s terms are fair and reasonable. This includes ensuring the debt amount and interest rate are accurate, and the repayment terms are manageable.

A COJ should not burden the debtor, which could lead to unnecessary financial hardship.

Keep Copies of Everything:

After signing a COJ, keep copies of the agreement and any communication with the creditor. This can help protect your interests in the event of a dispute or if you need to negotiate later.

Which Lawyers Can Help You With Creating Confession of Judgment?

Suppose you’re dealing with a Confession of Judgment (COJ) and need help. In that case, you’ll want to work with a lawyer who specializes in areas related to debt, contracts, and civil litigation.

These lawyers can guide you through the process, ensuring the terms are fair and legally sound.

Let’s look at which types of lawyers are best suited to assist you.

Debt Settlement Lawyers

Debt settlement lawyers specialize in negotiating and resolving debt disputes. Suppose you’re facing financial struggles and are considering signing a Confession of Judgment. In that case, a debt settlement lawyer can help assess whether it’s the best solution for you.

They can also advise negotiating better terms with your creditor to avoid a COJ altogether. If you’ve already signed one, they can help you understand its implications and explore options to resolve the debt.

Contract Lawyers

A Confession of Judgment is a contract between the debtor and the creditor. Therefore, a contract lawyer is ideal for reviewing the COJ clause and ensuring the agreement is legally binding and fair.

They’ll ensure that all terms are clear, that your rights are protected, and that there’s no room for coercion or unfair advantage.

Civil Litigation Lawyers

Civil litigation lawyers are skilled in representing clients in non-criminal cases, including debt-related issues.

They can help you understand how a COJ might impact future legal proceedings. If a creditor tries to enforce the COJ, a civil litigation lawyer can defend your case in court, providing you with the necessary representation.

Should I Sign A Confession Of Judgement?

A big question arises in your mind: whether to sign a confession of judgment. This document is a powerful tool creditors use to expedite the procedure of acquiring a civil judgment. In such an event, the debtor tends to initiate a condition of the confession of judgment. Moreover, it could include missing a required payment, the creditor filing an affidavit with the court and obtaining judgments for payment collection. Similarly, this could happen all without the requirement of bringing an actual lawsuit to prove the case. 

As a legal professional, I would suggest that it is wise not to sign a confession of judgment. Similarly, COJ is a kind of agreement that is included within merchant cash advances. Due to this, you must be aware of unfair terms that might be included within the confession of judgments. 

Similarly, suppose your advance agreement does contain a clause regarding confession of judgment. In that case, you are advised that you should sign it only after consulting with an experienced civil lawyer first. 

Final Words 

I hope you now better understand the workings of a confession of judgment. Additionally, seeking the right lawyer can make a huge difference in handling a Confession of Judgment. They’ll ensure you understand your options and rights, protecting your financial future.

Moreover, I suggest that if you have further doubts related to this legal clause, you consult with an experienced business debt lawyer. Similarly, contacting a good law firm is also a wise decision.

Read Also:

• Your All-Inclusive Guide To Workers Comp Lawyer
• Who Is An Expungement Lawyer? What Do They Do?
• What Is A Probate Lawyer? What Does A Probate Lawyer Do?