Confession of Judgment: States Where COJs Apply
A confession of judgment clause lets MCA funders get a court judgment against you without a lawsuit. Here's how COJs work, where they're still legal, and what to do if your contract has one.
The Clause Most Business Owners Sign Without Reading
Buried in the fine print of many merchant cash advance agreements is a paragraph that fundamentally changes the rules of the game if you default. It goes by several names: confession of judgment, cognovit note, warrant of attorney to confess judgment, or consent to judgment. Whatever it’s called in your contract, it means the same thing: you signed an advance authorization for the funder to obtain a court judgment against you — without filing a lawsuit, without serving you notice, without giving you an opportunity to respond or contest the claim.
This is not a theoretical risk. It is a tool that MCA companies have used aggressively against defaulted business owners, particularly through New York courts before the state’s 2019 crackdown. A COJ-enabled funder can move from a single missed debit to an enforceable court judgment in a matter of days. By the time you receive notice, the judgment may already exist.
Understanding whether your MCA contract contains a COJ clause — and what it means if it does — is one of the most important things you can do right now, whether you’re current on your payments or already behind.
How a COJ Works: The Mechanics
A standard MCA confession of judgment provision grants the funder — or their attorney — a power of attorney to appear before a court on your behalf and consent to a judgment in the funder’s favor for the amount you allegedly owe. No lawsuit needs to be filed. No summons needs to be served. No hearing is held. The funder presents the signed COJ document to the court clerk, and a judgment is entered as a matter of record.
According to Cornell Law’s Legal Information Institute, a confession of judgment entered against a business can be enforced like any other court judgment: bank account levies, wage garnishment against business principals (in states that allow it), liens on real property, and in some cases seizure of business assets. The business owner often learns about the judgment when their bank account is frozen — not from any prior notice.
The speed of the COJ process is its defining feature. A traditional commercial lawsuit in most states takes months from filing to judgment. A COJ can be filed and entered in days. That timeline compression is precisely why MCA companies valued the clause so highly — and why legislators in several states have moved to restrict or ban it.
New York's 2019 Ban: What Changed and Why
New York became the first state to substantially restrict COJs in commercial financing contracts in 2019, following an investigation by the New York Attorney General’s office and national reporting that documented how MCA companies had used New York courts to file tens of thousands of COJ judgments against small businesses across the country — even businesses with no connection to New York at all. Because COJ filings were fast and cheap in New York, funders from other states included New York governing-law clauses in their contracts specifically to exploit the system.
The 2019 legislation prohibited COJs in commercial financing contracts where the defendant is not a New York resident or does not regularly conduct business in New York. It did not eliminate COJs entirely — New York-based business owners dealing with New York-based funders can still encounter them. But it ended the practice of out-of-state funders using New York courts as a remote enforcement mechanism against businesses they never had a genuine connection to.
New York’s action drew attention to the issue nationally, but it did not eliminate COJs from the national MCA landscape. Funders adapted by updating governing-law clauses to other states where COJs remain fully enforceable.
States Where COJs Are Still Valid
As of 2026, confessions of judgment in commercial contracts remain fully or partially enforceable in a number of states, including New Jersey, Pennsylvania, Virginia, Ohio, Maryland, Illinois, and others. The specific rules vary: some states permit COJs only in commercial (not consumer) contracts, some require specific formatting or notarization, and some limit the amounts for which a COJ can be entered without additional process.
The most important clause to check in your MCA contract is the governing law and jurisdiction provision — usually near the end of the agreement. If your contract specifies that disputes are governed by the laws of a state where COJs are permitted, and if your contract contains a COJ provision, then a default puts you in the COJ risk zone regardless of where your business is physically located.
The FTC’s 2022 enforcement actions against MCA companies have highlighted how these jurisdictional provisions are sometimes used strategically to maximize funder leverage over defaulted business owners. Knowing which state law governs your contract is essential to understanding your actual risk profile.
Finding the COJ Clause in Your MCA Contract
MCA contracts are not standardized, and the COJ provision — if present — can appear in several different forms and locations. Search your contract (use Ctrl+F on a PDF) for these terms: “confession of judgment,” “confess judgment,” “cognovit,” “warrant of attorney,” “power of attorney to confess,” and “consent to judgment.”
Also check the governing law clause, typically in the final section of the contract. If it names a state other than your home state — particularly a state known for permissive COJ rules — that’s a signal to read the default provisions very carefully. Some contracts pair the governing law clause with a consent to jurisdiction provision, which means you’ve also agreed to submit to courts in that state even for disputes that have nothing to do with that state.
If you find a COJ clause, don’t panic — but do act. A COJ only becomes dangerous if you default, and default is not inevitable. The earlier you engage with your financial situation, the more options you have to resolve it before a COJ can ever be invoked. An MCA Relief Specialist can review your specific contract language and explain exactly what exposure you’re carrying.
What to Do If Your Contract Has a COJ Clause
If you’re current on your MCA payments and your contract contains a COJ clause, the best time to act is now — before any default makes the clause relevant. Settlement while current is possible. Modification requests are more likely to succeed when payments are on time. The COJ clause becomes moot if the advance is resolved before default.
If you are already behind on payments and your contract has a COJ clause, the priority is speed. The window between a missed debit and a filed COJ is often very short — days to weeks depending on the funder’s internal process. We’ve seen cases where a settlement was reached and documented before a COJ was filed, eliminating the risk entirely. In other cases, the COJ was filed but a negotiated settlement was still reached and the judgment was vacated as part of the resolution.
Past cases where COJ risk was resolved through negotiated settlement have included reductions of 30%, 50%, and more. Results vary and are not guaranteed — and creditors may not always agree to proposed terms. But the existence of a COJ clause in your contract is not a sentence. It is a signal to act quickly and strategically, with people who know how these cases move.
If a COJ Has Already Been Entered Against You
A judgment entered via COJ is not necessarily permanent. In most states, you have the right to file a motion to vacate a COJ judgment on grounds such as: the debt amount is incorrect, the COJ clause was not properly executed, the contract was fraudulent, or the judgment was entered in a state without proper jurisdiction over the dispute. These motions require a business attorney, but they have succeeded — particularly in cases where the COJ was filed in a state that has since restricted the practice.
Even without vacating the judgment, post-judgment settlement is still possible and common. A judgment on record does not mean the funder has already collected. Collection requires additional enforcement steps — garnishment orders, bank levies — and funders must pursue those through additional court process. Many funders settle post-judgment for a meaningful discount rather than pursue costly enforcement. We’ve seen a $193,028 judgment settled for $100,000 — a 48% reduction — after the judgment had already been entered.
If a COJ has been entered against your business, speak with an MCA Options Specialist and a business attorney as soon as possible. This article is general information about commercial business debt and is not legal advice for your specific situation. Past performance does not predict future results. But judgments entered through COJ provisions have been resolved at significant discounts — and the process starts with one call.
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