Confession of Judgment
A legal clause in some financing agreements where a borrower agrees in advance to a judgment against them if they default, letting a lender skip a full court trial to collect.
A confession of judgment clause allows a lender, in the event of a default, to file the pre-signed document with a court and obtain a judgment quickly, without the borrower being notified in advance or having the chance to present a defense the way a standard lawsuit would allow.
The use of confession of judgment clauses in commercial financing has drawn significant legal and regulatory attention in recent years, and several states have restricted or banned their use, so their enforceability varies by jurisdiction; a business should review any financing agreement’s default and legal remedy provisions carefully, ideally with an attorney, rather than relying on general information alone.
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