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Confession of judgment COJ
Also called COJ, cognovit note, judgment by confession.
A pre-signed admission of liability that lets a funder obtain a court judgment on default without suing you, without notice and without any opportunity to defend.
Drafted with AI assistance and checked by a person. Its factual claims were verified against the sources listed at the end, by Find Me Funders research desk.
What it means
You sign the confession at closing. It admits the debt, waives service and notice, waives defences, and authorizes entry of judgment for an amount stated in the document or calculated by the funder. It is held unfiled while payments continue.
On default the funder files it with an affidavit of the amount due. Judgment is entered, frequently by a clerk rather than after a hearing, and often within days. The first practical consequence is usually a bank restraint or levy on the operating account, which can stop a business trading before it knows a filing occurred. Setting aside a confessed judgment is possible but is a motion brought after the fact, on narrow grounds, in the funder's chosen court.
State law differs decisively and this is one of the few glossary terms where that difference is the whole story. New York amended CPLR 3218 in 2019 to bar entry of confessed judgments against debtors who are not New York residents or entities, which closed the venue used against merchants nationwide. Several states will not enforce a confession signed before default at all; others allow them with formalities such as separate signature, specific warnings or counsel involvement; a few enforce them broadly. Which law applies is set by the choice-of-law and venue clauses in the agreement.
The Federal Trade Commission has brought enforcement actions against cash advance funders concerning their use of confessions of judgment. In the Richmond Capital matter the FTC alleged the defendants "required businesses and their owners to sign confessions of judgment, which allow the defendants to immediately obtain an uncontested judgment in case of an alleged default", and the June 2022 order required them to vacate judgments against former customers and release the liens on their property.
Federal law already bars the device in consumer credit. The FTC's Credit Practices Rule, 16 CFR 444.2(a)(1), makes it an unfair act or practice for a lender or retail instalment seller to take a consumer credit obligation that "constitutes or contains a cognovit or confession of judgment". That rule reaches consumer credit obligations, so the restrictions that bite on small business funding are state ones. Virginia is the clearest: Va. Code § 6.2-2234 provides that no sales-based financing contract "shall contain any confession by judgment provision or any similar provision" and that any such provision is unenforceable.
Where this one catches people
The judgment amount is not audited before entry. It is whatever the funder swears is outstanding, which typically means the accelerated purchased amount plus contractual collection costs, default fees and interest, not the cash you received or the shortfall you were disputing. By the time the arithmetic is examined, the account is already frozen and the burden of challenging it is yours.
Where you will meet this term
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Sources and checks
Every figure on this page traces to a document someone read, on a date. Where a check is past its review date it says so rather than passing as current.
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New York restricts filing an affidavit of confession of judgment to the clerk of a New York county tied to the defendant’s residence, which forecloses its use against a debtor with no New York residence
definition"At any time within three years after the affidavit is executed, it may be filed, but only with the clerk of the county where the defendant's affidavit stated that the defendant resided when it was executed or where the defendant resided at the time of filing."
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A non-natural person resides, for CPLR 3218 purposes, in any county where it has a place of business
definition"For purposes of this section, a non-natural person resides in any county where it has a place of business."
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The FTC has brought enforcement action against merchant cash advance funders over their use of confessions of judgment, and the resulting order required judgments to be vacated and liens released
definitionDefendants "required businesses and their owners to sign confessions of judgment, which allow the defendants to immediately obtain an uncontested judgment in case of an alleged default"; the order requires them to "vacate any judgments against their former customers and to release any liens".
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The FTC Credit Practices Rule makes it an unfair practice to take a consumer credit obligation containing a cognovit or confession of judgment
definitionIt is unlawful to take an obligation that "constitutes or contains a cognovit or confession of judgment (for purposes other than executory process in the State of Louisiana), warrant of attorney, or other waiver of the right to notice and the opportunity to be heard in the event of suit".
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Virginia prohibits confession of judgment provisions in sales-based financing contracts and makes any such provision unenforceable
definition"No sales-based financing contract shall contain any confession by judgment provision or any similar provision. Any such provision in the contract shall be unenforceable."
Confession of judgment — common questions
What does confession of judgment mean?
A pre-signed admission of liability that lets a funder obtain a court judgment on default without suing you, without notice and without any opportunity to defend.
Where does confession of judgment catch people out?
The judgment amount is not audited before entry. It is whatever the funder swears is outstanding, which typically means the accelerated purchased amount plus contractual collection costs, default fees and interest, not the cash you received or the shortfall you were disputing. By the time the arithmetic is examined, the account is already frozen and the burden of challenging it is yours.
Is confession of judgment the same as an interest rate?
Confession of judgment is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does confession of judgment apply to?
Merchant Cash Advance, Working Capital.
Is there a worked example of confession of judgment?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside confession of judgment?
Acceleration clause, Affidavit of confession of judgment, Attorneys' fees clause, Collections, Judgment.
Has this definition been checked?
Yes. Its claims were verified against the sources listed at the end of this page, and the reviewer is named.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.