Confessions of Judgment in MCA Agreements: What They Are, How They Work, and What You Can Do

Most business owners who signed MCA agreements don't know what a Confession of Judgment is — even if they signed one. The clause is often buried in the final pages of a lengthy agreement, written in dense legal language, and rarely explained by the lender at the time of signing. Understanding it could be one of the most financially important things you do today.

What Is a Confession of Judgment?

A Confession of Judgment (COJ), also called a "cognovit note" or "warrant of attorney," is a provision in a contract by which you, the borrower, agree in advance to a court judgment being entered against you if the lender declares you in default. By signing an MCA agreement that includes a COJ, you waived your right to:

• Be notified before a judgment is entered
• Respond to the claim in court
• Present your side of the situation to a judge
• Contest the amount allegedly owed

A judgment can be entered, in certain states, within days — sometimes hours — of the lender filing the COJ paperwork. You may not learn a judgment has been entered until your business bank account is frozen.

How COJs Work in Practice

The typical COJ enforcement sequence:

1. Default occurs — failed ACH pulls, missed payments, or any other defined default event
2. Lender prepares COJ filing — their attorney files the pre-signed COJ in the applicable jurisdiction (often New York, regardless of where your business is located, because New York law governs many MCA agreements)
3. Judgment is entered — with no notice to you, no hearing, no opportunity to respond
4. Judgment is domesticated — if your business is in a different state, the lender may "domesticate" the New York judgment in your home state, giving them enforcement tools there
5. Enforcement begins — using the judgment, the lender can seek to restrain your bank accounts, place liens on business assets, garnish receivables, and in some cases pursue your personal assets if a personal guarantee was signed

Which States Allow Commercial COJs?

COJ enforceability varies significantly by state. Key facts:

• New York historically permitted commercial COJs and was the most common governing jurisdiction in MCA agreements. New York made significant legislative changes in 2019 limiting COJ use, but many pre-2019 agreements remain in circulation.
• Many other states either prohibit COJs in commercial contracts, limit their enforceability, or require specific additional disclosures.
• Choice of law provisions in your MCA agreement may designate New York as the governing jurisdiction even if your business is located elsewhere — meaning New York's historically permissive COJ rules may apply to your agreement.

Review your MCA agreement for: (1) the jurisdiction stated in the "Governing Law" or "Choice of Law" section, and (2) whether a COJ or "warrant of attorney to confess judgment" provision is included.

What You Can Do If a COJ Has Been or May Be Filed

If a COJ Has Not Yet Been Filed (But You're in Default)

This is the most important window. Actions before a judgment is entered carry significantly more leverage:

• Contact a business attorney immediately — specifically one with experience in commercial lending disputes and MCA cases in the applicable jurisdiction
• Contact our team immediately — financial intervention can begin in parallel with legal work
• Do not ignore lender communications — silence reads as abandonment and typically accelerates the lender's decision to file
• Consider proactive settlement outreach — approaching the lender with a proposed resolution before they take legal action often produces better terms than negotiating after a judgment

If a COJ Has Already Been Filed or Judgment Entered

A judgment is not necessarily the end. Options that remain:

• Motion to vacate: An attorney can file a motion to vacate the judgment if there are procedural defects, if the COJ was executed improperly, if the amount claimed is incorrect, or if the underlying agreement was structured as a loan (not a true receivables purchase) making it subject to usury laws
• Settlement negotiation: Even after a judgment, lenders often prefer a negotiated cash settlement to the ongoing cost of enforcement — particularly for discounted lump-sum payments
• Supervised repayment agreement: A structured payment plan that stops enforcement activity in exchange for consistent payments
• Bankruptcy analysis: In some situations, filing for bankruptcy protection may be the most appropriate resolution — but this should only be explored with an experienced attorney after considering all alternatives

The Personal Guarantee Intersection

If your MCA agreement includes both a COJ and a personal guarantee, the exposure is compounded. A COJ judgment against your business, combined with a personal guarantee, can be used to pursue personal assets — including savings, vehicles, and in serious cases, real estate — in addition to business assets.

If you signed both provisions, understanding the full scope of your exposure is urgently important. This is not a situation for delay or avoidance.