We hear from out-of-state business owners about this every week. They took a merchant cash advance or a business loan, signed a confession of judgment along with it, fell behind, and they just realized they can’t walk away from it. So they call us. Now, they need to know if it is enforceable in New York. It depends. That’s not a very helpful response. So let’s dig a little deeper.
Ended the Right to File a Confession of Judgment
New York amended CPLR 3218 by way of Senate Bill 6395, signed by Governor Cuomo on August 30, 2019. It ended the right to file a confession of judgment in New York against non-residents, both people and businesses. A Clerk can only enter a confession in the county where the affidavit states the defendant resided at the time it was signed, or the county where the defendant resides at the time it is filed. If the defendant does not reside in New York at either point, then no judgment can be entered. A business “resides” in any county where it maintains a place of business.
The gist of it is that if you signed a confession of judgement while you lived in New York and moved away before the creditor filed it, the creditor can still file it in the county you lived in when you signed it. If you signed it out of state but moved to New York before the creditor filed it, the creditor can file it in the county you live in when it is filed. If you signed it outside of New York and did not move, the creditor cannot have it entered in New York.
There is no exemption for a confession used to settle an existing lawsuit, or one obtained to secure a business loan, rather than a consumer loan. Nor is there an exemption for a confession signed after default.
Pay close attention to the place of business part, because for a company that is what residence means. If your business has a location in a New York county, you “reside” there for purposes of the new law.
What about a confession you signed years ago, before the law changed? The amendment seems to cover it, as its wording suggests it applies retroactively. The New York clerks can’t enter a judgment on a confession signed by a non-New Yorker, regardless of when the confession was signed. The apparent reason for the amendment is to prevent out-of-state creditors from using New York courts to obtain judgments against unsophisticated out-of-state debtors on transactions with no connection to New York. However, it also appears to invalidate all confessions signed by non-New Yorkers, even between sophisticated businesses, even where the creditor or the transaction has a connection with New York. As a result of the retroactivity, many creditors lost the benefit of a bargain they had already made.
CPLR 3215(i)
That doesn’t mean a funder has no options against you. So now you need to know about CPLR 3215(i). That’s the part of the law that lets a creditor enter a Clerk’s judgment on a default after the parties sign a stipulation of settlement. That does require that a lawsuit be pending against you. So the funder can’t just discontinue its lawsuit while you are still paying. A defendant may be reluctant to settle or may negotiate better terms, knowing that the lawsuit remains open until it pays in full. This can make you stronger in your settlement negotiations with the creditor. That said, if you signed a confession long ago, and the creditor hasn’t moved to enter it yet, the creditor may now try to modify the settlement papers so that you sign a new confession in your own state.
Probably Unenforceable in New York
So, back to the question in the title. If your business is outside New York in 2026 and never had a place of business there, a confession of judgment against you is probably unenforceable in New York. In fact, it won’t matter when you signed it. Here is what we suggest.
First, ask yourself, which scenario are you in? Are you being sued by the creditor and trying to settle that case, or did you sign a confession of judgment long ago, and is the funder now trying to use it? If you signed a confession long ago, check the address where your business had a place of business when you signed the confession and where it has a place of business now.
Second, if you have been served with a modified settlement that requires you to sign a new confession of judgment in your home state, review it carefully.
Third, if you are settling a lawsuit, take advantage of the fact that the lawsuit remains open and negotiate hard for better settlement terms. Call us if you have any questions.
