As a business owner, you sign dozens of documents each year to keep your business running as it should.

While you’re used to signing commercial leases and lines of credit papers, you need to be extra careful with legal and financial documents. A signature on some documents could mean the end of your business or leave you wallowing in a pit of debt.

Some financial documents are rife with legal jargon that the average business person can’t comprehend. That’s why wise business owners seek legal counsel before signing documents they can’t recognize.

A confession of judgment or COJ is one such document that you may be acquainted with.

The legal and financial trouble that comes with signing a confession of judgment unknowingly isn’t something you’d want for your business. That’s why it’s so important to understand these legal and financial documents before putting pen to paper.


In this post, we’ll look at what a confession of judgment is and what it means for your business. Keep reading!

What Is a COJ?

A confession of judgment is a documented agreement between a lender and a borrower or a landlord and a tenant. The agreement states that the borrower relinquishes legal defenses and takes liability for the borrower’s or tenant’s cash advance.  

Should any dispute arise between the lender and the borrower, the lender can skip lengthy legal processes and get back their funds faster. That means the lender and borrower don’t even have to go to court to argue their case. It’s an automatic win for the lender.

Keep in mind that the lender doesn’t have to inform the borrower that they’ve filed the case in court. That’s because the borrower has waived all legal defenses and can’t even present substantial evidence in court. The court will only give the borrower notice that a judgment has been entered following a particular dispute and the repercussions of the judgment.

This means that you give the lender the right to enter a legal dispute with you, and you can’t fight back. The lender could have a levy placed on not only the borrower’s business accounts but also their personal accounts. To make matters worse, the borrower also has to pay all legal and attorney fees for the entire process.

The borrower doesn’t even have to file a UCC to claim your personal assets. Provided you signed the COJ with a personal guarantee, the lender can claim some of your personal assets. 

How Does a Confession of Judgment Work?

A confession of judgment sounds like a very outlandish document, but it serves a crucial role in loan and tenancy agreements. The purpose of a confession of judgment is to guarantee the creditor of repayment when or before the loan period expires.

A business (borrower) seeking financial assistance approaches a lender to relieve the business of any financial burdens. One of the lender’s terms before releasing the loan is signing a confession of judgment. The lender then releases the funds to the business. 

Should the business delay the loan repayment even by a day, the lender moves to court. If the lender can get the court to agree that the borrower has breached the loan contract terms, the next phase begins. All the borrower has to do is breach a single term of the contract to initiate the court process.

Automobile Accident Lawsuits- What You Need to Know

The court acts on the confession of judgment document. The court may order the freezing of the borrower’s accounts and repay the lender with immediate effect.

That concludes the entire confession of judgment process. Keep in mind that the lender has no obligation to notify the borrower that money has been deducted from their account.

Are Confessions of Judgment Legal?

Given the crude and somewhat unfair nature of confessions of judgment, it’s hard to believe that such a process is legal. However, despite its outlandish and opportunistic ways, confessions of judgment are perfectly legal in many states.

Despite being a legal practice for business-creditor loan agreements, the federal government doesn’t allow COJ for consumers. This is because COJ is a somewhat predatory lending practice that could always leave consumers on the losing side.

There have been many cases of businesses left high and dry because of unknowingly signing confessions of judgment documents.

Can You Get Your Money Back?

It’s almost impossible to get your money back after signing a confession of judgment. To avoid such ugly scenarios here’s what you should do before signing a COJ.

1. Get an Attorney

The first thing you should do before putting ink to paper is to get an attorney, and not just any attorney. You need the cream of the crop to be able to follow up a confession of judgment case.

2. Do Homework on the Lender

Ensure you do your research on the lender before signing any papers. Ask around, check their website, and any reviews or testimonials. Try to learn as much about the credibility of the company before you sign any documents.

3. Find out About the Lender’s Headquarters

Do your research about the lender’s headquarters to determine if COJ is legal. COJs may even be illegal in the lender’s state, for starters.

4. Ask About Other Guarantee Options

Ask if they give any other guarantee options apart from signing a COJ. If the lender can’t compromise, then you’re better off looking for a different one.

4 Instances When You Might Need to Consult an Injury Lawyer

Although some lenders offer far better rates than banks, you’re better off dealing with banks than signing a COJ. Regardless of how desperate you are, you should never sign a COJ.

Business COJ: Don’t Sign It!

Business can be unpredictable, and you don’t know when you’ll need a little financial boost.

Regardless of your financial situation, signing a confession of judgment is never a good idea. You’re better off looking at other financing options or finding different lenders.

Here at ElMens, we like to talk about an array of interesting topics. For more informative and enticing reads, be sure to check out the other pieces on our site.