Confession of Judgment defense: what to do in the first 72 hours

A confession of judgment is the single most dangerous instrument in the MCA contract you signed. It is a pre-signed admission of liability that lets the lender obtain a court judgment without proving you defaulted, without serving you, and without giving you the chance to defend. In jurisdictions where COJs are enforceable, the lender can go from default declaration to filed judgment to frozen bank account in under a week. The first 72 hours after a COJ is filed often determine whether your business survives. This article walks the playbook step by step.

TL;DR

• A COJ is a pre-signed liability admission your lender holds and files in court if they declare default.
• The first thing that usually follows a filed COJ is a bank levy or restraining notice on your operating account, often within 5 to 10 business days.
• Within 24 hours of learning about a COJ filing, engage MCA-defense counsel licensed in the filing jurisdiction.
• Within 72 hours, identify procedural defects in the filing and assess whether a motion to vacate has merit.
• New York's 2019 reforms made COJs largely unenforceable against out-of-state merchants. This is the single most important jurisdictional fact in MCA defense.
• Do not contact the lender directly without counsel involved.

What a confession of judgment actually is

A COJ is a pre-signed admission of liability that you signed as part of the original MCA contract. The COJ is held by the lender. If the lender declares default, they can file the COJ with a court to obtain a judgment without your further participation. There is no lawsuit. There is no service. There is no opportunity to defend before the judgment is entered.

Once the judgment is recorded, the lender has all the enforcement tools that come with a court judgment. Bank levy. UCC enforcement on receivables. Asset seizure. Lien filings against personal property of any guarantor.

The COJ is what makes MCA contracts uniquely dangerous compared to ordinary commercial debt. With a normal commercial loan, the lender has to sue, serve, win at trial or default, and then enforce the judgment. That process takes months and gives the borrower time to defend or negotiate. With a COJ on file, the lender compresses that timeline to under a week.

What happens once a COJ is filed

The first thing that usually happens is a bank levy or restraining notice on your primary operating account. Funds in the account are frozen immediately. New deposits coming in are typically captured against the judgment until the judgment is satisfied or vacated.

Customers and processors served with UCC notices begin redirecting payments away from you. Stripe, Square, Toast, Clover, and similar processors will honor a properly served UCC notice within days. Payment that would have settled to you is held against the lender's claim instead.

The second-order effects compound quickly. Vendors hear about the freeze. Customers ask questions. Other lenders see the judgment and accelerate their own contracts. The whole commercial relationship network can deteriorate inside a week if the COJ is not addressed.

Operating becomes effectively impossible within days. Payroll bounces. Inventory cannot be paid for. Insurance lapses. The cascade is fast and visible to everyone the business deals with.

The first 72 hours

Three things have to happen inside 72 hours of a COJ being filed. The clock starts when you learn about the filing, which is sometimes the moment your bank account freezes rather than when the actual filing was recorded.

Hour 0 to 24: engage MCA-defense counsel

Engage MCA-defense counsel licensed in the jurisdiction where the COJ was filed. This is not a generic commercial litigation referral. COJ practice is a narrow specialty. The attorneys who do it well know which judges in which counties handle these motions and what arguments tend to succeed. Generic counsel will lose time learning the practice, and time is the resource you do not have.

If you are working with a relief firm already, they should have attorneys on call in your state and the lender's filing state. If they do not, that is itself a sign you need to escalate to a different firm. A relief program without legal coordination is incomplete, and a COJ event is exactly when that gap shows up.

Hour 24 to 48: identify procedural defects

Many COJs have procedural defects. The underlying contract may have been signed in a state where COJs are unenforceable. The COJ may have been filed in the wrong county or wrong court. The affidavit accompanying the COJ may have errors. The underlying default declaration may have been improper. The filing date or service date may be challengeable.

Procedural defects are the fastest path to a vacated judgment. A motion to vacate based on a clear procedural error often succeeds in days rather than weeks. Counsel reviewing the COJ filing in the first 48 hours focuses on procedural grounds first, because those are the fastest wins.

Hour 48 to 72: assess substantive defenses

Substantive defenses take longer to develop but are sometimes decisive. Fraud-in-the-inducement (the lender misrepresented terms at funding). Unconscionability (the contract effective APR is so high that no reasonable merchant would have agreed if disclosed). Lack of consideration. Procedural unconscionability in the COJ language itself.

These take more documentation than procedural defects and often require the merchant's bank statements, the contract, and any contemporaneous communications. The first 72 hours establish whether substantive defenses are available and worth pursuing.

Jurisdictional notes

New York used to be the venue of choice for MCA COJs because of friendly procedural rules. The 2019 amendments effectively ended that for out-of-state merchants. Most COJs filed against non-NY merchants in New York courts since 2019 have been vacated or unenforceable. If your contract has a New York COJ and you are not a New York merchant, the COJ is likely unenforceable and a motion to vacate has high odds.

Florida allows COJs but has stricter procedural requirements than New York. Filings often have defects that make them vulnerable. New Jersey, Pennsylvania, and Connecticut have varying rules. Texas and California are generally hostile venues for MCA COJs and lenders avoid filing there.

The jurisdictional question often determines whether the defense path is fast and clean or long and contested. Get the venue assessed in the first 24 hours.

What happens if you ignore it

If you do nothing for the first week, the bank levy hits and operating becomes impossible. If you do nothing for the first month, the judgment becomes harder to vacate because procedural challenges have time limits. If you do nothing for the first 90 days, the judgment is generally final and enforcement runs unimpeded against business and personal assets.

The window to defend a COJ effectively is narrow. The cost of letting it pass is the business.

The role of the relief firm vs the attorney

The relief firm coordinates the legal track and the negotiation track. The attorney handles the legal filings and court appearances. A credible relief firm has attorneys on call in your jurisdiction and the lender's filing jurisdiction, brings them in within 24 hours of a COJ event, and continues the negotiation track in parallel with the legal defense. The two tracks inform each other but operate independently.

If your relief firm cannot produce attorney coordination on a COJ event, escalate immediately to a firm that can. The cost of generic counsel learning MCA defense in real time on your case is not a cost you can afford.

What to do next

If you have just received notice of a COJ filing, stop reading this article and call. Our intake team coordinates with MCA-defense attorneys in every state where COJs are commonly filed and can have counsel on the matter within 24 hours. If you do not have an active COJ but have stacked MCAs and worry about one being filed, the right move is engaging a relief firm before the lender pulls the trigger. Pre-default engagement is dramatically more effective than post-COJ defense.