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What is a confession of judgment (COJ) on a merchant cash advance?
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A confession of judgment is a document some merchant cash advance agreements required the merchant to sign in advance, allowing the funder to obtain a court judgment without a trial the moment they declare a default. New York — long the favored venue for merchant cash advance funders — restricted the use of confessions of judgment against out-of-state debtors in 2019, which pushed many funders to file conventional lawsuits instead. If your agreement contains a COJ, it's important to understand its status under current law in the relevant state.
Whether a COJ is enforceable against you
Whether a confession of judgment is enforceable against you depends on the state and the specifics of your agreement, which is a question for a licensed attorney. The 2019 New York change was significant because so many MCA contracts named New York as the venue — but the analysis is fact-specific.
What to do if yours has one
If you find a COJ in your agreement, don't assume it's automatically valid or automatically void — both are possible depending on where and how it would be used. Reviewing the clause with a qualified attorney before a default is declared gives you the clearest picture of your exposure.