Confessions of Judgment

A confession of judgment (COJ) is a provision that is used in a merchant cash advance that allows the funder to bypass the requirements of the Uniform Commercial Code (UCC) and avoid a lengthy court process if the merchant defaults on the advance. If your business needs a merchant cash advance assistance attorney (MCA), contact the experienced debt relief specialists at We know the ins and outs of MCA agreements and the tactics funders use to go after businesses that experience a sales slump or receivables shortfall. 

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How Confessions of Judgment Work – MCA Assistance Attorney

If you have taken a merchant cash advance to obtain working capital, a COJ can have a significant impact on your business. Your merchant cash advance provider may not have explained this clause tucked away in your MCA agreement. 

What you need to know is that a confession of judgment is a provision whereby you accept liability for the cash advance and waive all your legal defenses if you default. If your monthly sales fall below the original target and you experience a receivables shortfall, you may not be able to meet the payment terms of the advance. 

In this situation, the COJ allows the MCA provider to automatically file a judgment with the court without filing a lawsuit because you have waived any legal defenses. The funder can then place liens against your business assets or begin to seize those assets. Once the funder files the judgment, you will be notified by the court and the funder can begin to levy your business accounts. 

Reasons MCA Providers Use Confessions of Judgment

MCA providers know that businesses take cash advances because they cannot access traditional sources of financing, such as business loans or lines of credit. This is typical for startups and small businesses that don’t have the requisite sales history or credit rating. MCA providers are more concerned with your future sales than credit criteria.

While merchant cash advances are pitched as “no collateral required,” this is not accurate. Including a confession of judgment in the MCA agreement allows the funder to mitigate its risk and increases the likelihood that you will pay back the cash advance. MCA providers know that you are more likely to avoid breaching the contract and triggering an event of default if your business assets are on the line. 

What happens if my business defaults on an MCA with a Confession of Judgment?

As mentioned above, when a confession of judgment is filed against your business, the funder can quickly seize your assets and potentially force your business into a liquidation bankruptcy. If your business cannot meet the financial obligations of an MCA agreement, your personal assets may also be at risk. This is because funders typically require businesses to sign a personal guarantee in addition to a confession of judgment. By signing such a guarantee, the funder can seize your personal assets (home, automobiles, bank accounts).

Are confessions of judgment enforceable?

Generally, confessions of judgment are not regulated by most states, with the exception of New York. As of August 30, 2019, confessions of judgment that are executed by parties that reside outside of New York are not enforceable. This means that out-of-state funders cannot file confessions of judgment against businesses domiciled in the state in the New York courts. MCA providers can easily circumvent this rule by filing confessions of judgment in jurisdictions outside of New York, however. 

In addition, there is little, if any, regulation of confessions of judgment at the federal level. While the Federal Trade Commission (FTC) has some jurisdiction over confessions of judgment, the agency’s authority is limited to consumer lending. 

The FTC has held that confessions of judgment in regard to extensions of credit to consumers may be considered an unfair and deceptive practice under section 5 of the Federal Trade Commission Act (the Credit Practices Rule). However, the businesses are excluded from the definition of “consumer” and are not protected from the adverse consequences of confessions of judgment. 

While state and federal lawmakers have considered enacting laws regulating merchant cash advances, businesses that rely on MCAs and other alternative products continue doing so at their own risk. 

How Can Help

If your business is struggling under the terms of a merchant cash advance that includes a COJ, turn to A well-conceived MCA agreement typically contains a “reconciliation clause” that requires the funder to restructure the payments if your business experiences a receivables shortfall. 

To take advantage of this clause, however, you must notify the funder of the shortfall and provide evidence that your business will return to profitability. Our team of debt relief specialists and MCA attorneys will negotiate a new payment plan with the funder and provide the necessary evidence that your business is financially stable enough to meet its obligations.

Contact Our Experienced Nationwide Debt Relief Specialists

If your business is at risk of defaulting on an MCA agreement, the best way to protect your rights is to work with our experienced debt relief specialists and MCA attorneys. Contact us today so our merchant cash advance assistance attorney can start reconciling your MCA.