If you’ve taken out a merchant cash advance (MCA) or are considering one, you may have come across a term that sounds harmless but carries serious consequences: the confession of judgment, or COJ. This clause can allow a lender to win a court judgment against you without notice — and without you ever stepping foot in a courtroom.
This guide answers the most pressing questions business owners have about COJs, MCA debt, and how to protect your business from aggressive collection tactics.
❓ What Is a Confession of Judgment (COJ)?
A confession of judgment is a legal clause that allows a lender to obtain a court judgment against you without a trial, without notice, and without your defense simply by claiming you defaulted on your agreement.
When you sign an MCA contract with a COJ clause, you’re essentially waiving your right to due process. The lender can file the judgment in court, and once it’s entered, they can begin collection actions immediately.
Important: Don’t forget the concept of debt validation and verification letters. These are tools that can help you dispute debt. A COJ won’t even afford you the opportunity to use them.
❓ How Does a COJ Work in MCA Agreements?
In MCA contracts, COJs are often buried in the fine print or included as separate documents like a power of attorney. Once you sign, the lender can:
- File a judgment in court without notifying you
- Skip the lawsuit process entirely
- Begin garnishing your bank accounts or placing liens on your assets
You may not even know a judgment has been entered until your accounts are frozen or your business operations are disrupted.
❓ Why Do Lenders Use COJ Clauses?
Lenders include COJ clauses because they:
- Speed up the collection process
- Avoid costly litigation
- Increase pressure on borrowers to repay
- Reduce the chance of legal challenges
From the lender’s perspective, it’s a shortcut to enforcement. But for business owners, it’s a serious risk especially if your cash flow is already strained.
❓ What Are the Risks of Signing a COJ?
Signing a COJ can expose your business to:
- Immediate bank account freezes
- Asset seizures without warning
- Wage garnishment
- Public judgments on your credit report
- Legal fees to fight judgments filed in distant courts
Because COJs bypass the normal legal process, lenders hold all the power. You lose the ability to dispute the debt, negotiate terms, or even explain your side of the story.
❓ Are COJs Legal in Every State?
No, COJs are not legal everywhere. Some states ban them outright, while others allow them under strict conditions. Even in states where COJs are permitted, courts may scrutinize them if they appear unfair or deceptive.
A judge can set aside a COJ if there’s evidence of:
- Fraud
- Lack of proper disclosure
- Unconscionable contract terms
But challenging a COJ requires legal action often after the damage is already done and the court has already issued judgment against you. Post-COJ legal action can be a lengthy process.
❓ What Happens If I Default on an MCA With a COJ?
If you miss payments or violate the terms of your MCA agreement, the lender may:
- Accelerate the full balance
- File the COJ immediately
- Freeze your accounts
- Seize business or personal assets
- Damage your credit score
And because COJs allow judgments without notice, these actions can happen quickly — often before you have a chance to respond.
❓ Can I Defend Against a COJ?
Yes, as with most things in law, but it’s not easy. Common defenses include:
- Improper execution
- Lack of notice
- Unconscionable terms
- Statutory bans
Deadlines to challenge a COJ are short, and the process is complex. That’s why legal support from an experienced professional is essential.
❓ How Can I Spot a COJ Clause in My MCA Agreement?
Look for language like:
- “Waiver of defenses”
- “Attorney may confess judgment”
- “Power of attorney to enter judgment”
These are red flags. If you see them, ask the lender to remove the clause. If they refuse, consider walking away or consult a professional before signing.
❓ What Are Safer Alternatives to MCA Financing?
If you’re looking for funding but want to avoid COJs, consider:
- Small business loans
- Lines of credit
- Invoice financing
These options typically come with lower costs and fewer legal risks.
❓ Why Is MCA Debt So Risky?
Think of MCA debt as both a loan and a purchase of future receivables. You receive a lump sum and agree to repay a fixed percentage of daily sales. While it offers fast funding, it often includes:
- High factor rates
- Daily or weekly payments
- COJ clauses
If sales dip, repayment becomes difficult and the COJ gives lenders a powerful tool to collect.
❓ How Can CuraDebt Help?
CuraDebt has years of experience helping business owners navigate MCA debt and COJ clauses. We offer:
- Contract reviews to identify hidden COJ language
- Debt settlement strategies to reduce what you owe
- Legal referrals for challenging judgments
- MCA restructuring services, including extending repayment terms and lowering interest rates to make your debt more manageable
If you’re struggling with MCA debt, we also offer targeted solutions. Learn more in our guide: Merchant Cash Advance Relief: A Solution for Your MCA Loans
❓ What Should I Do If I’ve Already Signed a COJ?
If you’ve already signed an MCA agreement with a COJ clause:
- Locate the clause in your contract
- Consult a professional — CuraDebt offers free consultations
- Explore defenses if a judgment has been filed
- Consider settlement or restructuring to avoid further damage
Time is critical. The sooner you act, the more options you’ll have.
Final Thought
Confession of judgment clauses are one of the most aggressive tools lenders can use and they’re often hidden in MCA agreements. If you’re a business owner in need of funding, it’s essential to understand what you’re signing and what rights you may be giving up.
CuraDebt is here to help you make informed decisions, challenge unfair terms, and find relief from MCA debt. Don’t wait until your accounts are frozen or your assets are seized. Schedule your free consultation today and take control of your financial future.
