What is a confession of judgment in an MCA contract?

A confession of judgment (COJ) is a contractual provision in which the merchant — and usually the personal guarantor — pre-authorizes the funder to file an already-signed admission of liability in court upon default. The funder doesn't have to prove the case; they file the COJ, get judgment entered (often the same day), and immediately begin enforcement: bank account levies, asset seizures, wage garnishment of the guarantor. Total timeline from missed payment to frozen accounts: 5–30 days.

Are confessions of judgment legal everywhere?

No. New York banned COJs against out-of-state debtors in 2019 (CPLR §3218). Several states never allowed them in commercial contracts at all. Most other states still enforce them, but with varying procedural requirements. The full state-by-state breakdown is below — and even within enforcing states, courts increasingly scrutinize whether the COJ was properly executed.

If my contract has a COJ but I'm in a state that doesn't enforce them, am I safe?

Mostly, but not entirely. The funder can still file the COJ in their home state if their forum-selection clause picks that jurisdiction. They then need to domesticate the judgment in your state, which requires registering the foreign judgment and gives you a window to challenge enforcement based on lack of due process or public policy. Many states have refused to domesticate COJ judgments from other states — but not all.

Can I negotiate the COJ out of my contract?

Sometimes. Many funders use COJs as a default-template provision they're willing to drop for credit-worthy merchants in competitive deals. Strategy: ask for it to be removed at the term sheet stage, before funding. Bring competing offers. The smaller and more financially distressed your business, the harder this gets — the COJ is the funder's downside protection.

What's the typical timeline from default to frozen bank account?

Day 1: Missed ACH. Day 2–7: Funder notice of default. Day 5–14: COJ filed with the court. Day 7–21: Judgment entered (often without hearing or notice in confession states). Day 14–30: Writ of garnishment served on your bank. Day 14–30: Bank account frozen and levied. In aggressive states with same-day filing, the entire sequence can complete in 7–10 days.

Can a COJ judgment be vacated after entry?

Yes, but it's an uphill fight. Grounds typically include: lack of valid execution (signature defects, missing notarization), fraud in inducement of the COJ specifically, mathematical error in the judgment amount, or violation of state-specific COJ statutes (e.g., the document is too old, signed too far in advance, or covers an obligation that doesn't yet exist). Filing fees and attorney costs for a motion to vacate run $5,000–$25,000 and success rates vary widely by state.

MCA confession of judgment by state — the detailed merchant guide (2026)

A confession of judgment is the single most dangerous clause in any MCA contract. Here's exactly how it works, where it's enforceable, where it's been banned, and what to do if yours has one.

The 60-second answer

A confession of judgment (COJ) is an already-signed admission of liability that the funder can file with a court the moment you default. There is no lawsuit, no notice, no hearing, no opportunity to defend. The judge enters judgment, the funder serves a writ of garnishment on your bank, and your operating account is frozen inside a week to a month.

New York banned COJs against out-of-state debtors in 2019. A handful of other states have never enforced them in commercial contracts. Most still do, with widely varying procedural protections. The most important defensive moves are (a) checking the state chart below to know what you're signing into, (b) negotiating the COJ out at term-sheet stage if possible, and (c) understanding that even one missed ACH is enough to trigger the entire sequence.

How a confession of judgment actually works

The mechanics matter because the speed is what makes COJs so dangerous. Here's the step-by-step:

At funding: You sign the COJ document along with the MCA agreement. The COJ is a separate document, often notarized, that admits liability for the full payback amount and authorizes any attorney to enter judgment against you and your personal guarantor upon the funder's affidavit of default.
The trigger: An "event of default" occurs — missed ACH, bounced withdrawal, closed bank account, breach of any contract covenant. The funder's default definitions are typically broad.
Funder files affidavit: The funder's attorney files the original COJ plus an affidavit stating the merchant is in default and stating the unpaid balance. Filed in the court named in the COJ — usually a state court in the funder's home jurisdiction.
Judgment entered: In states that enforce COJs, the clerk or judge enters judgment based on the document alone. No hearing, no notice to you, no opportunity to be heard before judgment.
Domestication (if needed): If you're in a different state, the funder registers the foreign judgment in your state under the Uniform Enforcement of Foreign Judgments Act. This typically takes 30 days and gives you a brief window to object on limited grounds.
Enforcement: Writ of garnishment served on your bank. Bank legally obligated to freeze funds and turn them over. Asset seizure, lien filing, and additional collections begin.

State-by-state enforceability — the practical map

States that ban or severely restrict COJs in commercial contracts

New York — CPLR §3218 amended in August 2019 to prohibit entry of confession judgments against debtors who do not reside in New York. This is the most consequential change in MCA collections in a generation. Most major MCA funders moved their forum selection out of New York after this. If you're an out-of-state merchant with a pre-2019 NY-forum contract, that COJ is largely dead letter.

New Jersey — COJs require specific procedural compliance and have been tightly scrutinized by courts. Functionally hard to enforce in commercial MCA cases.

Massachusetts — Strong public policy against COJs; rarely used in commercial MCA enforcement.

Michigan — Long-standing prohibition on COJs (MCL §600.2906); courts routinely refuse to enforce them.

Wisconsin — Restricts COJs to limited circumstances; most commercial COJs are unenforceable.

States with significant procedural barriers

California — Has a statutory scheme (CCP §1132 et seq.) that allows COJs but with strict procedural requirements including attorney representation at execution and contemporaneous notarization. Many MCA COJs fail to meet these requirements and are challenged successfully.

Illinois — Enforces COJs but with notice requirements and strict execution rules; courts increasingly skeptical.

Connecticut — Enforces COJs but new commercial financing disclosure rules give merchants additional defenses.

States that broadly enforce COJs (the high-risk zones)

Pennsylvania, Maryland, Virginia, Ohio, Texas, Florida, Georgia — Confession of judgment provisions in commercial contracts are generally enforceable, subject to specific state procedural requirements. The funder's choice-of-forum clause usually picks one of these (or Delaware) precisely because enforcement is reliable.

Delaware — Confessions of judgment enforceable; preferred forum for many funder contracts due to predictable courts and creditor-friendly law.

Cobb County, Georgia — Not a state, but worth calling out specifically: a significant share of MCA contracts pick Cobb County state court as the COJ forum because of speed of entry and pro-creditor procedural posture.

States with no clear modern precedent

Many smaller states have not seen contested MCA COJ litigation in recent years. The honest answer is: don't rely on absence of precedent as protection. Assume your COJ will be enforced unless you have specific contrary authority.

How to read your contract for a COJ

Look for these signals:

Separate notarized document. COJs are usually executed as a separate page or short document — often titled "Affidavit of Confession of Judgment" or "Cognovit Note." If you signed a separate notarized document at funding, you almost certainly executed a COJ.
Language admitting liability. Phrases like "the undersigned confesses judgment in favor of," "authorizes any attorney to appear for and against," "without process or notice," or "irrevocable power of attorney."
Cognovit provisions. "Cognovit" is the older legal term for a COJ. Some contracts call it a "cognovit note" or "warrant of attorney." Same thing.
Forum selection. Look for a clause naming a specific court (often in NY pre-2019, NJ, PA, GA, DE) where the COJ will be filed. This tells you where the funder plans to enforce.
Personal guarantor signatures. Most COJs include the personal guarantor — meaning your personal assets are reachable, not just the business.

If your funding closed in the past 60 days and you signed something matching these descriptions, you have a COJ. Pull every document the funder sent and the broker forwarded.

Worked example: how a COJ unfolds in real time

A Maryland HVAC contractor takes a $90,000 MCA from a New York-based funder in 2018 (pre-CPLR amendment). Factor 1.36, 14-month term, daily ACH. COJ executed at funding, filed in New York County. In month 8 a slow billing cycle causes an ACH to bounce. Timeline:

Day 1: ACH bounces ($412 daily debit, account had $380).
Day 2: Funder retries; bounces again.
Day 3: Funder's collections desk emails default notice.
Day 5: Funder's attorney files COJ in New York County Supreme Court with affidavit of default stating unpaid balance of $61,200.
Day 6: Judgment entered by clerk — no hearing, no notice to the merchant.
Day 9: Funder begins process to domesticate the NY judgment in Maryland under MD Rule 2-623.
Day 14: Merchant receives notice of foreign judgment registration in Maryland. 30-day objection window opens.
Day 22: Funder serves writ of garnishment on the merchant's primary bank.
Day 23: Bank freezes $48,300 — all available funds. Payroll due in two days. Operations stop.

Same scenario today, with the 2019 CPLR amendment in place, the NY court would refuse entry of the COJ because the merchant resides outside New York. The funder would have to file a normal collections suit in Maryland, with notice, opportunity to defend, and a litigation timeline measured in months. Same default, completely different outcome.

Defensive moves if you find a COJ in your contract

Pre-funding (best case):

Negotiate it out. Term sheet stage, in writing, before final documents. Some funders will drop it for stronger credits.
Negotiate a notice requirement. If you can't kill the COJ, add a requirement that the funder give you 5–10 business days written notice of intent to file before doing so. Buys cure time.
Choose a different funder. Some legitimate funders never use COJs. Use that as a filter.

Post-funding, pre-default:

Move your operating account. If you default, the bank named on the ACH authorization is where the funder will serve the writ. Consider moving the operating balance to a separate institution before any trouble.
Cash reserves. Keep 30–60 days of operating cash in an account NOT connected to the funder's ACH and NOT in the same bank.
Pre-emptive workout call. If you see a default coming, call the funder's hardship desk before the ACH bounces. A negotiated forbearance is much cheaper than a COJ enforcement.

Post-default, post-COJ filing:

Engage MCA-defense counsel immediately. Within 48 hours. The domestication window is your only real procedural opening.
Motion to vacate. Grounds vary by state but include execution defects, lack of consideration, fraud in inducement of the COJ specifically, and statutory violations.
Bankruptcy as last resort. Chapter 11 (or sub-V) automatic stay freezes COJ enforcement. Expensive but sometimes the only option.

Industry trend: COJ use is declining (slowly)

The 2019 New York amendment fundamentally shifted the MCA collections landscape. Many funders quietly removed COJs from their standard templates because:

Domesticating a NY judgment in another state takes 30–90 days and gives the merchant objection rights — eroding the speed advantage that made COJs valuable.
State legislators in NJ, IL, MA, and others have signaled they may follow NY's lead.
ISO brokers report merchants increasingly refuse contracts with COJs once they understand the risk.
CFPB and FTC have flagged COJ practices as potentially deceptive in small-business finance.

But "declining" is not "gone." A significant portion of funder templates still include COJs, and they are still routinely enforced in PA, OH, GA, FL, TX, DE, and VA. Read your contract. Always.

Frequently asked questions

What is a confession of judgment in an MCA contract?: A confession of judgment (COJ) is a contractual provision in which the merchant — and usually the personal guarantor — pre-authorizes the funder to file an already-signed admission of liability in court upon default. The funder doesn't have to prove the case; they file the COJ, get judgment entered (often the same day), and immediately begin enforcement: bank account levies, asset seizures, wage garnishment of the guarantor. Total timeline from missed payment to frozen accounts: 5–30 days.
Are confessions of judgment legal everywhere?: No. New York banned COJs against out-of-state debtors in 2019 (CPLR §3218). Several states never allowed them in commercial contracts at all. Most other states still enforce them, but with varying procedural requirements. The full state-by-state breakdown is below — and even within enforcing states, courts increasingly scrutinize whether the COJ was properly executed.
If my contract has a COJ but I'm in a state that doesn't enforce them, am I safe?: Mostly, but not entirely. The funder can still file the COJ in their home state if their forum-selection clause picks that jurisdiction. They then need to domesticate the judgment in your state, which requires registering the foreign judgment and gives you a window to challenge enforcement based on lack of due process or public policy. Many states have refused to domesticate COJ judgments from other states — but not all.
Can I negotiate the COJ out of my contract?: Sometimes. Many funders use COJs as a default-template provision they're willing to drop for credit-worthy merchants in competitive deals. Strategy: ask for it to be removed at the term sheet stage, before funding. Bring competing offers. The smaller and more financially distressed your business, the harder this gets — the COJ is the funder's downside protection.
What's the typical timeline from default to frozen bank account?: Day 1: Missed ACH. Day 2–7: Funder notice of default. Day 5–14: COJ filed with the court. Day 7–21: Judgment entered (often without hearing or notice in confession states). Day 14–30: Writ of garnishment served on your bank. Day 14–30: Bank account frozen and levied. In aggressive states with same-day filing, the entire sequence can complete in 7–10 days.
Can a COJ judgment be vacated after entry?: Yes, but it's an uphill fight. Grounds typically include: lack of valid execution (signature defects, missing notarization), fraud in inducement of the COJ specifically, mathematical error in the judgment amount, or violation of state-specific COJ statutes (e.g., the document is too old, signed too far in advance, or covers an obligation that doesn't yet exist). Filing fees and attorney costs for a motion to vacate run $5,000–$25,000 and success rates vary widely by state.