You’ve heard the word, you’ve seen it in your paperwork, you’ve been warned about it - and now you’re probably wondering: can they really file a confession of judgment against you, now, in 2026? And you’re not wrong to be scared. It’s highly possible that there was a confession of judgment included in your merchant cash advance paperwork.
Let’s start with the basics. A confession of judgment is just a document (usually part of the merchant cash advance contract) which authorizes the funder to obtain a judgment against the borrower. It’s called a “confession” because the debtor essentially confesses (or agrees) to pay the debt and gives permission to the creditor to get a judgment against them. When you sign one (a CoJ, for short), you are basically agreeing in advance to let a court enter a judgment against you for the money you owe on a loan or advance. The CoJ allows the creditor or funder to skip a bunch of steps, like filing a lawsuit and proving their case in court.
New York Amended CPLR §3218
For years, funders could take that shortcut through a New York county clerk’s office even when the owner lived somewhere else entirely. That changed on August 30, 2019, when New York amended CPLR §3218. This law change means they have to file it in the right county now, based on where you were living or where you live now. Under the amended law, the clerk can accept a request for entry of judgment only if it’s in the correct county for the debtor: the county where the signer’s affidavit says they lived when they signed, or the county where they live when it’s filed. If neither is in New York, the clerk is prohibited from entering judgment. The clerk can’t take it without a local connection. In other words, funders can’t use a New York clerk to secure a judgment against an out of state party. But if you are an owner, this one is good news. They can’t slip in a special, hard-hitting confession like they could before 2019.
And it doesn’t matter much when you signed. The amendment doesn’t say “this only applies from now on”, and on its wording the rule appears to reach backward, so a New York clerk isn’t supposed to enter a confession from a non-New Yorker no matter when it was executed. So no overnight judgments on old agreements anymore. This was a law meant to stop bad guys from doing shady business. But the language is super broad. The apparent target was out-of-state creditors using New York clerks against out-of-state owners over deals with no connection to New York, but it’s written so broadly that it still catches people who took a legitimate business loan or settled a lawsuit with a confession. It doesn’t treat business loans any different than personal loans. It also makes no exception for confessions signed after a default.
The New York effect is a timing game. Residence is checked at two moments: when you signed and when the funder files. If you signed it in New York, they can still come after you in New York, even if you live in California now. If you lived out of state when you signed but have since moved to New York, the funder can file in the county where you live now. Translation: a simple move doesn’t nullify the risk; the window stays open. For a business, your “residence” is wherever you’re doing business, even if you just have a one-desk office. So a New Jersey business that opened a location in Brooklyn may count as a New York resident. It feels unfair, but it’s how the law works.
They Have to Start with the Lawsuit
If you were living in another state when you signed and you still live in another state now, they can’t enter judgment in New York, as long as your business has no place of business there either. Because when the funder loses a weapon, they have to either find another way to apply pressure, or they give the merchant space. They have to start with the lawsuit. Lawsuits often end in settlements, and a creditor that settles with an out-of-state owner and wants a quick judgment if payments stop has to rely on a different rule, CPLR §3215(i), which lets the clerk enter judgment after a default under a stipulation of settlement. The paperwork is more restrictive than a confession: unlike a confession, which let the funder discontinue the case, 3215(i) only works while the lawsuit is still pending. To do this they need to keep the lawsuit open, which makes it public and harder for the business to ignore. For the funder who tried to use a New York clerk, the language of 3218 has killed the quick dollar. The need to move to 3215(i) forces more hassle and makes the next move a negotiation.
For an owner, that means the coercion tool shifts from a silent, secret N.Y. filing to an active lawsuit, one that is hard to ignore. A lawsuit that stays open until the last payment can become a slower, steadier lever. They have to choose between litigation and settlement. It changes the equation. An open case on the public record is a real cost to you, and a fair reason to hold out for better terms. Either way, the owner has more leverage to try to negotiate a settlement. There’s a mix of emotion and technicality here, for sure.
Watch for one more move. Practitioners tell funders to be on the lookout for an opportunity to have the debtor sign it again in their home state. That tends to come up when a settlement is being reworked. The deal will be that in consideration for the execution of this new confession of judgment, you will receive reduced payments, extended payment time, and other accommodations. Before you sign, understand that you may be handing back exactly the protection the 2019 change gave you. If you are considering a settlement, do some research and consider the pro’s and con’s of executing a new confession of judgment and getting a concession from the funder in return.
Get the Paperwork
So what should you do? Don’t panic. Get the paperwork. Know what’s actually in your contract. Then read through it thoroughly. Don’t just skim. Look at every condition, every clause. Confirm whether the confession was signed in New York, where you lived at the time of signing, or if you now live in New York. Check, too, whether your business has had a place of business in New York. If the answer is neither, the confession can’t be used in New York. There needs to be a method to tackle this challenge, because doing nothing will result in nothing. Doing something about your situation right away will save you time and money down the road.
The confession may be weaker than you feared, but the balance is still there. Your goal should be to get the thing in the way of you running your business out of the way. Do this by negotiation. Whatever your contract says, you can still take control. If you’re not sure where you stand, don’t guess. Get help. From there, set your plan, make your counter-offer, and get this problem behind you.
