Confession of Judgment in an MCA Contract
Confession of judgment in an MCA contract: what it lets a funder do.
A confession of judgment is a signed statement, made before anything goes wrong, that you agree the funder can get a court judgment against you without a lawsuit you get to defend. If the funder says you defaulted, it files the paper and gets a judgment fast, then can move to collect. Several states now ban or limit them in merchant cash advance contracts.
How does a confession of judgment work?
- You sign the confession with the contract, usually as a separate affidavit. It names an amount or a formula for one.
- The funder says a default happened. You may not get a chance to argue before the next step.
- The funder files the confession with a court clerk. The clerk can enter a judgment without a hearing.
- With a judgment, the funder can ask to levy your bank accounts or garnish money owed to you.
That speed is the point, and the danger. A normal lawsuit gives you notice and a chance to answer. A confession skips that part. Challenging it afterward is possible, but it means going to court after the money has already moved.
Is a confession of judgment the same as a lawsuit?
No. With a confession, the owner signs a statement in advance agreeing to a judgment, so the funder files it without a trial. In a lawsuit, the funder has to serve you and win the case first. That difference is why a confession clause moves so fast after a default.
Which states limit it?
| State | What the law says | Source |
|---|---|---|
| California | A judgment by confession can't be entered in a California court. | Code of Civil Procedure § 1132 |
| Texas | A confession of judgment in a commercial sales-based financing contract is void. | Finance Code § 398.055 |
| Virginia | A confession of judgment provision in a sales-based financing contract can't be enforced. | Code of Virginia § 6.2-2234 |
| Florida | A power of attorney to confess judgment signed before a lawsuit is void. | Florida Statutes § 55.05 |
| Connecticut | A commercial financing contract can't waive notice and a hearing before a prejudgment remedy. | Conn. Gen. Stat. § 36a-868 |
Other states have their own court rules on confessions, and some funders write the contract under another state's law. The state named in the contract matters as much as where you live. This is general information, not legal advice. For your contract and your state, talk to a business lawyer.
What should you check before you sign?
- Search the contract for the words confession, affidavit and judgment. Ask the funder whether one is part of the deal.
- Ask whether the funder will remove it. Some will, especially where state law already voids it.
- Read what counts as a default. A confession is only as dangerous as the default clause that triggers it.
- Check the governing-law and venue clauses: which state's law and which court.
- Have a business lawyer read the confession and the personal guarantee together. One often reaches the other.
What if one has already been filed?
Move fast. Talk to a lawyer the same day. Courts can vacate a confessed judgment for reasons like fraud, a wrong amount or a defect in the affidavit, but deadlines are short. Don't move money around to dodge a levy without advice. That can make things worse. Our default guide walks through the rest of the collection steps.
How does Afterfirst handle it?
When we bring back offers, we point out any confession of judgment in the paperwork we see, so you can ask about it before you sign. Applying is free, and you never pay Afterfirst a fee. The funder pays our commission only if a deal funds, and the amount is in the offer paperwork before you sign.
Where do these facts come from?
- Confession of judgment (Cornell LII Wex)
- California Code of Civil Procedure § 1132 (confession of judgment)
- Texas Finance Code, chapter 398 (commercial sales-based financing)
- Code of Virginia, title 6.2, chapter 22.1 (sales-based financing)
- Florida Statutes § 55.05 (powers of attorney to confess judgment)
- Connecticut Department of Banking guidance and disclosure form, Conn. Gen. Stat. §§ 36a-861 to 36a-872
Questions about your file?
Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.