Confessions of Judgment in New York

* * * Please note that we do not handle Merchant Cash Advance (MCA) lending matters, or Confessions of Judgment (COJ) given in a MCA transactions.* * * 

A confession of judgment (“COJ”) in New York is a way for a party to obtain a judgment without the need to bring a lawsuit. It is a document in the form of an affidavit by the party confessing judgment. Both individuals and entities (i.e., such as corporations and LLCs) can confess judgment. The COJ can either be for money currently due or becoming due in the future, or to secure the plaintiff against a contingent liability.

Typically, a COJ might be used to backstop a settlement agreement where a creditor has permitted an account debtor to repay the debt over time in a payment plan. If the account debtor fails to pay as agreed the COJ can then be entered as a judgment and once entered enforced like any other judgment.

In terms of a contingent liability, a COJ can be used to secure a personal guaranty. For example, if a business is providing goods or services to another business on credit terms, but is not satisfied with the credit worthiness (either because the business had bad credit or was a start-up business without a credit history), the seller of the goods or provider of the services can demand a personal guaranty from one or more of the principals of the buyer. To avoid the need to have to bring a lawsuit to enforce the personal guaranty, the seller of goods or provider of services may require that the personal guaranty be backstopped by a COJ of the guarantor. If the buyer/customer performs as agreed neither the guaranty nor the COJ will be needed. However, if the buyer/customer fails to perform the seller may obtain entry of the COJ without the need to bring a lawsuit to determine liability.

The specific requirements for COJ in NY are specified in Civil Procedure Law & Rules (CPLR) 3218. The requirements are as follows:

1. Notarized Affidavit of Defendant. Plaintiff must have an original notarized “wet ink” COJ affidavit from the defendant. It must be a notarized affidavit that has been notarized by a notary public and not just “signed under penalty of perjury” as permitted under federal law (see 28 U.S.C. § 1746) or the law of some states (see N.J. Rule Gen. Application R. 1:4-4; Cal. C.C.P. § 2015.5). Plaintiff must have the original “wet ink” notarized affidavit and not a photocopy, pdf or fax copy of it.

2. Stating Sum for Which Judgment May be Entered. The COJ needs to state the sum in dollars for which judgment may be entered (or have a blank for that purpose and authorize plaintiff to fill in the amount after crediting payments made up to that point, such as for installment payments or a payment plan).

3. State County of Residence or Where Entry Authorized. The COJ must state the county where the defendant resides or if defendant is a non-resident, the county in which entry is authorized (typically New York, New York for non-resident defendants).

4. State Facts Out of Which Debt Arose. If the judgment to be confessed is for money due or to become due, the COJ must state concisely the facts out of which the debt arose and show that the sum confessed is justly due or to become due.

5. Contingent liability. If the COJ is for the purpose of securing the plaintiff against a contingent liability, the COJ needs to state concisely the facts constituting the liability and showing that the sum confessed does not exceed the amount of the liability.

6. Entry of judgment. At any time within three years after the affidavit is executed, the COJ may be filed with the clerk of the county the specified in the COJ.

Note that if the liability is one that will last longer than three years (for example a payment plan over four years), then plaintiff would want to consider obtaining a new confession of judgment prior to expiration of the first one, because the first one will not be enforceable after three years.

A COJ can obtained against more than one joint debtor for a joint debt due or to become due. Similar to a judgment entered jointly and severally against more than one defendant (i.e., where each defendant is responsible for the entire amount, but plaintiff can only recover up to the amount of the judgment), a COJ can be obtained against multiple joint defendants.

One a judgment is entered based on a COJ it can be enforced just like any other judgment. In addition, it can be domesticated in other states as a New York judgment.

The attorneys at Starr & Starr, PLLC, have experience in preparing confessions of judgment, having them entered as judgments in New York, and enforcing them once entered. Please feel free to contact us at (888) 867-8165 or by email at info@starrandstarr.com for additional information.

* * * Please note that we do not handle Merchant Cash Advance (MCA) lending matters, or Confessions of Judgment (COJ) given in a MCA transactions.* * *