How to Vacate a Confession of Judgment in New York

If you signed a merchant cash advance agreement, there’s a good chance you also signed a confession of judgment (COJ) without fully understanding its implications. When a funder files that COJ and a judgment gets entered against you, it can feel final and permanent. However, the reality is that judgments entered by confession are not unchallengeable and can often be vacated with proper legal strategy. Understanding your options could mean the difference between losing your business assets and getting a fresh start.

What is a Confession of Judgment?

A confession of judgment is a signed statement you executed when taking out the MCA, in which you admit to owing a debt and authorize the funder to enter judgment against you without a trial, often without even formal notice. Funders use COJs because they bypass the litigation process entirely and go straight to enforcement: bank restraints, wage garnishment, and liens on business assets. The confessions of judgment mechanism is particularly aggressive in the MCA industry. It allows funders to move quickly from alleged default to asset seizure, often before merchants even realize what’s happened.

• Why Funders Use COJs: They eliminate litigation costs and time delays, allowing immediate asset seizure if default occurs
• The Danger to Your Business: A filed COJ can result in frozen bank accounts, wage garnishment, and secured liens before you have a chance to defend yourself

Common Grounds to Vacate a COJ

A judgment entered by confession can be challenged on several grounds. The key is identifying which defect applies to your specific situation and having an attorney prepare the motion properly.

• Defective Execution: The COJ statute has specific technical requirements for proper authorization language, correct affidavit form, and appropriate notarization. Funders and their counsel don’t always get this right, and a defective COJ can be vacated on procedural grounds alone.
• Debt Amount Mismatch: If the funder entered judgment for an amount that doesn’t reflect payments already made, or applied unauthorized default interest or fees, that’s a strong basis to challenge the judgment.
• No Actual Default Occurred: Sometimes judgment is entered based on a default that didn’t happen the way the funder claims: a missed debit due to a bank error, a payment that was made but misapplied, or a dispute over whether the reconciliation provision was honored.
• Improper Filing or Timing: COJs generally must be filed and entered in a manner consistent with New York’s procedural rules. Deviations from proper procedure can be grounds for vacatur.
• Underlying Usury: If the MCA is functionally a disguised loan and the effective rate exceeds New York’s usury caps, this can undercut the validity of the judgment itself.

The Vacatur Process Step by Step

Vacating a confession of judgment requires a structured legal process. Understanding each step helps you know what to expect and how long the process typically takes.

• Emergency Relief if Needed: If your bank account has already been restrained, the first move is often an emergency motion to lift the restraint while the broader challenge to the judgment proceeds. This buys time and prevents further financial damage while you pursue the main vacatur claim.
• File the Motion to Vacate: Your attorney files a motion laying out the specific grounds (procedural defect, factual dispute, usury, or a combination) supported by the contract, bank records, and any communications with the funder.
• Funder’s Response: The funder can oppose the motion, and the court will weigh the evidence on both sides.
• Court Decision: If successful, the judgment is vacated and the case either proceeds as a normal lawsuit (giving you the chance to defend on the merits) or is dismissed outright, depending on the grounds.

Why Timing Matters

The longer a judgment sits unchallenged, the more damage it can do to your credit, your business operations, and your ability to secure future financing. Bank restraints freeze operating capital. Liens cloud your ability to refinance or sell assets. Each day of delay strengthens the funder’s position and weakens yours. If you’ve just discovered a judgment was entered against you, or if you received notice that your account has been restrained, treat this as time-sensitive. The earlier you take action, the better your chances of success and the less collateral damage you’ll sustain.

Frequently Asked Questions

Can I vacate a confession of judgment after my account has been frozen?
Yes. Even after a bank restraint is in place, you can file an emergency motion to lift the restraint while pursuing the broader vacatur claim. This stops the bleeding while your attorney builds the case for vacatur.

How long does the vacatur process typically take?
The timeline varies depending on the court’s schedule and the complexity of the defects you’re challenging. Generally, expect 2-4 months from filing to a decision, but this can be faster if the procedural defect is clear.

What if the funder disagrees with my math on the amount owed?
Disagreement about the amount is precisely what vacatur motions address. If you can show through bank records that the amount in the judgment doesn’t match what you actually owe (accounting for payments made and any unauthorized fees), that’s a viable ground.

Do I need an attorney to file a vacatur motion?
While you have the right to represent yourself, COJ vacatur is a procedurally complex area where technical mistakes can be fatal to your case. An attorney experienced in MCA defense and COJ vacatur will know the local court’s rules and pitfalls.

What happens if the COJ is vacated?
Once vacated, the judgment is voided. The bank restraint is lifted. The funder can still pursue other remedies, but they’re back to standard lawsuit procedures, which means you get a chance to defend on the merits and potentially counterclaim.

Vacating a confession of judgment isn’t a DIY process, but it’s absolutely doable with the right legal strategy and representation. Grant Phillips Law has litigated over 600 merchant cash advance matters, including COJ vacatur cases, across New York, New Jersey, Connecticut, and Florida. If a judgment has been entered against you or your account has been restrained, contact us for a free consultation. The sooner you act, the sooner you can get your business back on solid ground.