Quick Summary:
A confession of judgment (COJ) is a signed affidavit that can allow a creditor to obtain a New York judgment without first filing and litigating a conventional lawsuit or holding a court hearing. Under New York’s CPLR §3218, the affidavit must satisfy specific statutory requirements, and New York law can provide grounds to challenge—or vacate—an improperly entered COJ. For a business facing a merchant cash advance (MCA) default, acting quickly can be essential.
At Aronow Law P.C., we help business owners in Nassau County, on Long Island, and throughout New York assess urgent MCA collection issues, including confessed judgments, bank restraints, and related enforcement activity.
What Is a Confession of Judgment?
A confession of judgment is not an ordinary court case. In many commercial agreements, including some merchant cash advance contracts, the business owner and sometimes an individual guarantor are asked to sign an affidavit authorizing entry of a judgment if specified events occur. The creditor may later file that affidavit and obtain a judgment without the usual sequence of a summons, complaint, answer, discovery, and trial.
New York’s CPLR §3218 sets the rules for a judgment by confession. Among other requirements, the affidavit must state the amount for which judgment may be entered, authorize entry of judgment, identify the defendant’s county of residence, and, where money is allegedly due, state the facts giving rise to the debt and why the stated sum is due. Courts closely examine whether these statutory requirements were met.
That is why a COJ New York matter should never be treated as automatic or beyond challenge. The underlying agreement, affidavit, payment history, alleged default, filing county, and collection papers all matter.
How MCA Funders Use Confessions of Judgment
In a merchant cash advance transaction, a funder may claim it purchased a business’s future receivables rather than made a loan. The agreement may nevertheless contain an MCA COJ signed at closing, often along with a personal guaranty. After an alleged default—such as blocked ACH withdrawals, a claimed breach of a reconciliation provision, or a dispute over payments—the funder may file the COJ and seek immediate collection.
Once a judgment is entered, a creditor can move quickly to enforce it. A restraining notice or levy may lead to a bank account frozen MCA
crisis before the business owner has had a meaningful opportunity to respond. Payroll, rent, vendor payments, tax obligations, and daily operations can all be affected.
For that reason, business owners should promptly obtain the filed affidavit of confession, judgment, notice of entry, restraining notice, levy, underlying MCA agreement, payment records, and all communications concerning the alleged default. Those documents help a business debt attorney evaluate both the judgment and the creditor’s enforcement steps.
What Changed Under the 2019 CPLR §3218 Reform?
Before the 2019 amendment, a nonresident defendant could authorize a confession of judgment to be filed in a New York county designated in the affidavit. The 2019 reform changed that framework. For affidavits filed on or after the reform took effect, the affidavit may be filed only with the clerk of the county where it states the defendant resided when it was executed or where the defendant resided when filing occurs. For a business entity, CPLR §3218 provides that it resides in a county where it has a place of business.
This was a meaningful change for out-of-state business owners and guarantors. It restricted the use of a preselected New York venue simply because an MCA contract said that venue was authorized. It does not mean every post-2019 COJ is invalid, but it makes careful venue analysis critical. A filing in an unauthorized county may support a challenge based on the clerk’s lack of authority to enter the judgment.
Potential Grounds to Vacate a Confession of Judgment
Whether a confession of judgment can be vacated in New York depends on the facts and the procedural route. Aronow Law P.C. can review whether grounds exist, including the following:
- Improper venue: The COJ may have been filed in a county that CPLR §3218 does not permit, particularly in light of the 2019 reform.
- Material defects in the affidavit: The affidavit may fail to state a proper amount, adequate facts showing why the amount is due, the necessary authorization, or other statutory information.
- Fraud, misrepresentation, or lack of informed consent: A signed document may be challengeable when the facts show it was procured through deception, materially altered, signed in blank, or otherwise used improperly.
- No valid default or inflated balance: An MCA funder’s claimed default, calculation of the outstanding amount, fees, and alleged breach may be disputed.
- Violation of the 2019 reform: A judgment entered contrary to the amended county-residency requirements may warrant immediate scrutiny.
Procedure matters. In many situations, a party seeking to vacate a confessed judgment must commence a separate action rather than simply make a motion under the existing judgment index number. However, a challenge asserting that the clerk or court lacked authority to enter the judgment may be treated differently. The right strategy depends on the documents, timeline, and legal basis for relief.
What Happens to a Frozen Bank Account During a Vacatur Challenge?
Filing a vacatur application does not automatically release a restrained bank account. A business may need to seek emergency relief, such as a temporary restraining order, stay of enforcement, or preliminary injunctive relief, depending on the circumstances. The goal is often to preserve the status quo while the court considers the challenge and to prevent avoidable harm to ongoing operations.
Speed, evidence, and proper procedure are vital. Do not assume the bank can simply remove the restraint because the business disputes the debt. Instead, obtain legal advice immediately, communicate with the bank as appropriate, preserve records, and avoid taking steps that could create new issues under the MCA agreement or enforcement process.
Immediate Steps After an MCA COJ Is Filed
If your business has received notice of a confessed judgment or discovers that its account has been restrained, take these steps:
- Confirm the court, county, index number, judgment date, and creditor name.
- Collect every MCA agreement, guaranty, COJ affidavit, payment record, bank notice, and default communication.
- Identify the business’s actual place of business and the guarantor’s residence at the relevant times.
- Do not ignore a bank restraint, marshal’s notice, sheriff’s levy, or information subpoena.
- Contact an MCA Defense attorney promptly to evaluate emergency relief and defenses.
Businesses confronting an MCA default New York dispute may also need a broader strategy. Depending on the facts, that can include challenging enforcement, addressing an MCA lawsuit, negotiating a settlement, or defending related claims. Learn more about MCA Lawsuit Defense
and our broader Debt Defense
services.
FAQ
What is a confession of judgment in New York?
A confession of judgment is an affidavit through which a defendant authorizes entry of a judgment under CPLR §3218. It can permit a creditor to obtain a judgment without first litigating a standard lawsuit, provided statutory requirements are satisfied.
Can I vacate a COJ after my account is frozen?
Potentially. A frozen account does not eliminate the right to challenge the judgment. A business may need to pursue vacatur and request prompt relief from enforcement, but the appropriate procedure and available remedies depend on the specific facts.
How long does a COJ vacatur take in New York?
Timing varies based on the county, court calendar, type of challenge, need for emergency relief, and whether material facts are disputed. Account-restraint issues may require faster court action than the ultimate decision on vacatur.
Does improper venue make every MCA COJ invalid?
Not necessarily. Venue is a serious issue, especially under the 2019 amendments to CPLR §3218, but every case requires a review of the filing date, affidavit, defendant’s residence or place of business, and the grounds asserted for relief.
If a confession of judgment has been filed against your business, contact Aronow Law P.C. for immediate assistance. Our business debt attorneys in Nassau County and New York can review the COJ, assess available defenses, and help you respond to urgent MCA collection action. You can also learn more about Confessions of Judgment.
