Confession of Judgment on a Merchant Cash Advance
A confession of judgment is one of the most powerful tools an MCA company can hold — but it is not unbeatable, and understanding it is the first step to dealing with it.
A confession of judgment can become a frozen account fast. If one has been entered against you, call us today.
What a Confession of Judgment Is
A confession of judgment, or COJ, is a document some merchants sign as part of a merchant cash advance — often without fully realizing what it does. In it, you essentially agree in advance that if the funder says you defaulted, it can obtain a court judgment against you without first filing a lawsuit, serving you, or giving you a chance to argue your side.
That is what makes a COJ so dangerous: it can collapse the usual protections of going to court. With one in hand, a funder can sometimes move from 'you defaulted' to a judgment, and then to a frozen bank account, in a matter of days. But a COJ is not the end of the story — depending on where and how it was used, it may be challengeable, and the underlying debt can often still be negotiated.
Rapid Restructure helps owners facing a confession of judgment by negotiating with the funder to resolve the debt. We are a debt-restructuring service, not a law firm, and the information below is general education, not legal advice. If a COJ may be challenged in court, that is a job for a licensed attorney.
What to Do Right Now
- 1
Find out if a judgment has actually been entered
There is a difference between having signed a COJ and having a judgment entered against you. If you think a funder has filed one, check with your bank for any holds and consider looking up the judgment in the relevant court. Knowing where things stand sets your timeline.
- 2
Move quickly — timing is critical
If a judgment has been entered, the window to challenge it or to act before your accounts are frozen can be short. Speed matters more here than in almost any other MCA situation. Don't wait to see what happens.
- 3
Pull your MCA agreement and the COJ document
Locate the advance agreement and the confession-of-judgment affidavit you signed. Where it was filed, where you reside or do business, and the details of the document can all affect whether the judgment can be challenged.
- 4
Talk to an attorney about vacating it
In some circumstances a confessed judgment can be challenged or vacated — for example over where it was filed or defects in the paperwork. We are not a law firm; a licensed attorney in the relevant state can advise on that. It is worth exploring in parallel with negotiation.
- 5
Call us to negotiate the underlying debt
Even with a judgment in place, the debt itself can usually still be negotiated. We deal directly with the funder to work toward a resolution — and, where possible, to address the judgment as part of it. The consultation is free.
Not sure what to do first? Talk it through with us today.
Call (305) 306-8384How a Confession of Judgment Works
If an MCA company holds a confession of judgment — a document some merchants signed allowing the company to obtain a judgment without first filing a lawsuit or giving advance notice — it can sometimes obtain a judgment and move to freeze accounts very quickly, without the merchant having had a chance to contest the underlying claim in court first. This applies to commercial financing (not consumer credit, where confessions of judgment are banned under federal law), and whether it can happen depends heavily on the governing-law and residency terms of the specific contract — a number of states now restrict or void confessions of judgment even for businesses.
A merchant who has had a confession of judgment entered against them may, in some circumstances, be able to ask a court to challenge or vacate (undo) it — for example where the judgment was filed in the wrong venue, where the debtor did not actually reside in or have a place of business in the filing jurisdiction, where the confession affidavit was defective, or where the judgment was procured by fraud. How that challenge must be brought, and whether it is available, is fact-specific, depends on state law, and usually depends on acting promptly.
New York amended CPLR § 3218 in 2019 to bar filing a confession of judgment against a debtor who was not a New York resident, which ended the once-common practice of MCA companies obtaining mass confessions of judgment in New York courts against out-of-state small businesses. A number of other states also limit or prohibit confessions of judgment in business transactions, so whether one is enforceable against a given merchant depends heavily on the governing law and the merchant's location.
The above is general information, not legal advice. Laws vary by state and change over time. Consult a licensed attorney about your specific situation.
A Confession of Judgment Is Not Automatically the End
It is easy to feel that a confession of judgment means you have no options left. In reality, two paths often remain open. First, depending on where and how the COJ was filed, it may be challengeable in court — something to discuss with a licensed attorney. Second, and regardless of the judgment's status, the underlying debt can usually still be negotiated down.
Funders that obtain a judgment by confession still generally prefer a realistic, agreed payoff to chasing a business that may have little left to take. That is the opening we work in — bringing the funder to a resolution your business can actually manage.
How Restructuring Helps With a COJ
Restructuring is not a new loan and it is not bankruptcy. We contact the MCA funder directly and negotiate to reduce the total payoff, extend the timeline, or both — and, where a confessed judgment is involved, to fold a resolution into the agreement where possible.
Because we deal with MCA funders regularly, we often have a realistic sense of what a particular lender will accept. Combined with any legal challenge an attorney may pursue, that can turn a frightening confessed judgment into a structured, affordable outcome.
There is no upfront fee and the first conversation is free. If a confession of judgment has been entered against you, time is short — call now.
“I didn't even remember signing a confession of judgment until my account was frozen over it. Between the negotiation and getting the right legal advice, we found a way through. Call the moment you can.”
— Wholesale business owner
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Results vary based on your lenders, balances, and individual circumstances. Rapid Restructure is a debt-restructuring service, not a law firm, and does not provide legal, tax, bankruptcy, or credit-repair advice. Any figures shown — such as potential payment reductions or timelines — are illustrative examples, not guarantees of results. Information about state laws is general in nature, may change, and should not be relied upon as legal advice; consult a licensed attorney for guidance specific to your situation.