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.
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.
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:
You may not even know a judgment has been entered until your accounts are frozen or your business operations are disrupted.
Lenders include COJ clauses because they:
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.
Signing a COJ can expose your business to:
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.
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:
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.
If you miss payments or violate the terms of your MCA agreement, the lender may:
And because COJs allow judgments without notice, these actions can happen quickly — often before you have a chance to respond.
Yes, as with most things in law, but it’s not easy. Common defenses include:
Deadlines to challenge a COJ are short, and the process is complex. That’s why legal support from an experienced professional is essential.
Look for language like:
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.
If you’re looking for funding but want to avoid COJs, consider:
These options typically come with lower costs and fewer legal risks.
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:
If sales dip, repayment becomes difficult and the COJ gives lenders a powerful tool to collect.
CuraDebt has years of experience helping business owners navigate MCA debt and COJ clauses. We offer:
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
If you’ve already signed an MCA agreement with a COJ clause:
Time is critical. The sooner you act, the more options you’ll have.
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.
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