9 Things to Know About Confessions of Judgment in MCA Contracts

If you signed an MCA in the last few years, there’s a good chance you signed a confession of judgment. Most business owners don’t know what it is. They find out when their bank account is already frozen.

Short answer: A confession of judgment (COJ) is a document you signed, often buried in the MCA paperwork, where you agree in advance that if the lender says you defaulted, they can walk into court, file the COJ, and get a judgment against you without telling you, without a hearing, without you having any chance to defend yourself. You find out after the judgment is already entered. By then, it’s already too late.

Here’s what you need to know.

1. You probably signed one and don’t remember.

MCA funders bury the COJ inside the closing package. It’s a separate document, notarized, often signed the same day as the agreement. Most business owners are focused on the funding amount and the daily payment, and they sign whatever’s put in front of them. If you can’t find your COJ, ask for a full copy of your closing documents. It’s in there.

2. It waives almost every right you’d normally have in a lawsuit.

In a normal lawsuit, you get served, you get to respond, you get to show up, you get to defend yourself. With a COJ, you’ve already waived all of that. You’ve agreed, in writing, in advance, that the lender’s version of events is correct and that a judgment can be entered against you on nothing more than their say-so. You don’t get a phone call. You don’t get a hearing. You don’t get to argue the amount is wrong.

3. New York used to be the jurisdiction of choice – and then it wasn’t.

For years, MCA lenders filed COJs in New York courts regardless of where the business was located. A pizza shop in Arizona, a trucking company in Georgia – it didn’t matter, the COJ said New York, and New York courts would take it. In 2019, New York changed the law and stopped accepting COJs against out-of-state debtors. That was a huge shift. But it didn’t end COJs. It just pushed them.

4. The lender can still use your COJ – they just file it somewhere else.

After the New York change, funders moved to other jurisdictions – Pennsylvania, New Jersey, and a few others that still accept them. Some lenders have COJs signed under the law of whatever state works for them at the time. If you signed one, don’t assume it’s unenforceable because of the New York change. It probably still works, just not in New York.

5. The first thing you’ll know is your account is frozen.

Here’s how it actually goes down. The lender claims default. They file the COJ. The court enters the judgment, sometimes within 24 hours. The lender then takes that judgment and sends it to your bank as a restraining notice or levy. Your accounts get frozen. You try to make payroll and the payment bounces. You call the bank and they tell you there’s a judgment. That is how you find out.

6. Personal guarantors get hit too.

The COJ isn’t just against the business. If you personally guaranteed the MCA – and you almost certainly did, they all require it – the COJ is against you personally. Your personal bank account, your personal assets, everything’s on the table. A lot of business owners think their house or their personal savings are separate from the business. With a COJ and a personal guarantee, they’re not.

7. You can fight it, but the burden is on you.

Once a COJ judgment is entered, you’re playing defense. You have to file a motion to vacate, and you have to give the court a reason – fraud in the inducement, the COJ was signed under duress, the amount claimed is wrong, the lender breached the agreement first. These motions are not cheap, and they’re not fast. You’re looking at thousands in legal fees just to get the judgment paused, and no guarantee. Meanwhile, your accounts are still frozen.

8. Some of the grounds that actually work.

Courts have vacated COJ judgments where the lender materially misrepresented the agreement, where the default was manufactured (lender blocked the ACH themselves then claimed default), where the amount claimed includes fees and charges that weren’t actually owed, and where the MCA itself was found to be a disguised loan (usury). The usury angle is the big one – if a court reclassifies the MCA as a loan, the interest rate calculation blows past the state’s legal limit, and the whole thing can get unwound. It’s not easy to win. But it’s the angle with the most teeth.

9. If you’re thinking about signing one, don’t.

If you’re looking at a new MCA right now and there’s a COJ in the package, understand what you’re agreeing to. You’re handing the funder a loaded gun and telling them to trust you about when to fire it. Some funders are reasonable. Many aren’t. If you have any other option – SBA, line of credit, a different MCA without a COJ – take it. If you’re already past that point and you’ve signed one, your leverage is gone the moment they decide to use it. Don’t give them a reason.