A confession of judgment is one of the most dangerous weapons in an MCA funder's arsenal. It is a pre-signed document that allows the funder to walk into court and obtain a judgment against you — without filing a lawsuit, without giving you notice, and without letting you present a defense. If you signed an MCA with a COJ clause, you may already have a judgment against you that you never knew about.
The good news: confessions of judgment are increasingly unenforceable, and there are powerful legal tools to vacate these judgments and stop their enforcement in Texas.
What Is a Confession of Judgment?
When you sign an MCA agreement, the funder often requires you to sign a separate document — sometimes called a "cognovit note," "warrant of attorney," or "affidavit of confession" — that gives the funder's attorney the power to enter a judgment against you in court on your behalf. You are essentially signing away your right to be heard before a court takes your money.
Here is how the process typically works:
- You sign the MCA agreement, which includes a COJ clause or a separate COJ affidavit
- At some point, the funder decides you are in "default" (sometimes for reasons as minor as a single missed ACH debit)
- The funder's attorney files the COJ in court — usually in New York — without notifying you
- A judgment is entered against you, often for the full "purchased amount" plus fees and attorney costs
- The funder then domesticates (registers) the judgment in Texas and begins seizing your bank accounts and assets
You may not learn about any of this until your bank account is frozen.
Why COJs Are Legally Vulnerable
Texas Law: COJs Are Void (HB 700)
Texas House Bill 700, signed in 2025, makes confession of judgment clauses in commercial financing contracts void and unenforceable. Including a COJ clause in a contract with a Texas merchant may void the entire agreement.
Even before HB 700, Texas has long held COJs in disfavor. Texas courts view them as fundamentally unfair because they deprive defendants of due process — the constitutional right to notice and an opportunity to be heard before a judgment is entered.
New York Law: No COJs Against Out-of-State Defendants
In 2019, New York amended CPLR 3218 to prohibit confessions of judgment against defendants who are not residents of New York at the time the COJ is signed. Since most Texas business owners who sign MCA agreements are not New York residents, COJs entered against them in New York courts are void under New York's own law.
This is a powerful defense: the COJ is invalid under the very law of the state where it was filed.
Due Process: Constitutional Protections
The Fourteenth Amendment guarantees that no person shall be deprived of property without due process of law. A judgment entered without notice or a hearing violates this fundamental right. A judgment rendered in violation of due process is void and not entitled to full faith and credit — meaning Texas courts are not required to enforce it.
How to Challenge a COJ Judgment
Step 1: Move to Vacate in the Rendering Court
File a motion in the court that entered the judgment (usually New York) arguing:
- The COJ was not authorized: You are not a New York resident, so CPLR 3218 prohibits the COJ
- Lack of jurisdiction: The court had no personal jurisdiction over you as a Texas resident
- Fraud or misrepresentation: The funder misrepresented that the COJ would never be used, or inflated the judgment amount beyond what was actually owed
- Meritorious defense: You have valid defenses (usury, void contract, HB 700) that should be heard on the merits
Step 2: Challenge Domestication in Texas
If the funder has already filed the judgment in Texas under the UEFJA, you can:
- File a motion to vacate the domesticated judgment in Texas court
- Argue the judgment is void for lack of due process, lack of jurisdiction, or violation of New York and Texas law
- Seek a stay of enforcement to prevent garnishment and account freezes while your challenge is pending
- Cite Texas public policy — HB 700 reflects Texas's strong policy against COJs in commercial financing
Step 3: Seek Emergency Relief
If your accounts are already frozen, file for a temporary restraining order (TRO) to:
- Release frozen funds needed for payroll and operations
- Stop further enforcement of the void judgment
- Maintain the status quo while the validity of the judgment is determined
Template Arguments for Your Motion
Your motion to vacate should hit these key points:
On Due Process: "The judgment was entered via a confession of judgment, without notice or hearing, in violation of the Fourteenth Amendment's due process guarantee. A judgment obtained in violation of due process is void ab initio."
On New York Law: "New York law (CPLR 3218) prohibits confessions of judgment against out-of-state residents. Defendant is a Texas business; the COJ was entered in violation of New York's own statute, rendering it void."
On Texas Public Policy: "Texas Finance Code §306.001 (as amended by HB 700) voids confession of judgment clauses in commercial financing contracts, reflecting Texas's strong public policy. Enforcing this judgment would contravene Texas law and policy."
On Fraud: "Plaintiff's agent represented to Defendant that the confession of judgment was 'just a formality' and would never be used. Defendant relied on this representation. Plaintiff's subsequent filing of the COJ constitutes extrinsic fraud."
What to Do Right Now
If you signed an MCA with a confession of judgment clause:
- Check your court records: Search for judgments in New York (particularly New York County and Westchester County) to see if a COJ has been filed against you
- Monitor your bank accounts: Watch for unexpected freezes or garnishments
- Revoke ACH authorization: Contact your bank to stop further automatic debits
- Contact an attorney immediately: Time matters — the sooner you challenge a COJ judgment, the better your chances of vacating it and recovering frozen assets
This article is part of the MCA Defense Guide. Call (469) 607-8552 for a free consultation.