Confessions of judgment in New York: what business owners need to know

A confession of judgment lets a funder get a court judgment against you without suing first. New York limited them in 2019, but they are still legal against New York businesses and New York guarantors. Below: how they work, what the law allows today, and what to do if one was filed against you.

By Solomon Wiesen, editor. Updated October 2026. General information, not legal advice. If a confession of judgment affects you, speak to a New York lawyer.

What a confession of judgment is

A confession of judgment is a sworn statement, signed in advance, in which you admit you owe a set amount and agree that the other side can turn that admission into a court judgment if you default. In New York it is called a judgment by confession and is governed by CPLR 3218. You may also see it labeled an affidavit of confession or a cognovit.

In merchant cash advance agreements it usually arrives as a separate page signed at closing, often by the business and by the owner as personal guarantor. If the funder later says you defaulted, it files the affidavit with the county clerk. There is no lawsuit, no hearing and no chance to argue first. The clerk enters the judgment, and the funder can then freeze bank accounts, place liens and collect through a marshal or sheriff. Many owners first learn about the judgment when their bank account is restrained.

Why funders like them

A normal lawsuit takes months and gives you a chance to raise defenses. A confession of judgment can turn into an enforceable judgment within days. Funders want that speed, and it is the reason regulators and courts have looked hard at how these are used.

What New York changed, and what it left alone

Before 2019, funders across the country filed confessions of judgment in New York courts against businesses in other states, because New York clerks entered them quickly. A 2018 Bloomberg Businessweek investigation documented thousands of these filings, and New York amended CPLR 3218 the following year.

Since the amendment took effect on August 30, 2019:

• Residence matters. The affidavit has to state the New York county where the person signing lived when they signed it. Someone who did not live in New York at that time cannot have a confession of judgment entered against them in New York.
• Businesses count as residents where they operate. A company or LLC is treated as residing in any New York county where it has a place of business, not only where it is headquartered.
• Filing is limited to that county. The judgment can be entered only in the county named in the affidavit, or in the New York county where the defendant lives when it is filed.
• There is a time limit. The affidavit has to be filed within three years after it was signed.

What did not change

The reform did not ban confessions of judgment. A business with a location in New York, and an owner who lives in New York and signs as guarantor, can still have one entered against them here. Out-of-state businesses are protected from New York confessions of judgment, but the funder can still sue them in the ordinary way.

The bill that would ban most of them

Senate Bill S2305, with Assembly companion A7545, would stop New York courts from entering a judgment by confession on any consumer debt and on any debt whose principal was under $5 million when it was taken on. That would cover nearly every small business advance and loan.

The Senate passed it on March 25, 2025, and again on May 13, 2026. Both times it went to the Assembly Judiciary Committee and stalled there. As of October 2026 it has not passed the Assembly or been signed, so confessions of judgment remain legal for New York businesses. You can follow the bill on the New York Senate website.

Enforcement against advance companies

New York regulators have also gone after funders directly. In January 2025, the New York Attorney General announced a $1.065 billion judgment and settlement with Yellowstone Capital and related companies, which the office said had made illegal loans disguised as merchant cash advances. The settlement cancelled about $534.5 million owed by more than 18,000 small businesses. See the Attorney General’s announcement of the case.

How to tell if you signed one

1. Search every page you signed. Look for “confession of judgment”, “judgment by confession”, “affidavit of confession” and “cognovit”. It is often a separate exhibit at the back, not in the main contract.
2. Check who signed it. If you signed as guarantor, the confession can name you personally, not just the business.
3. Check the county. The affidavit should name the New York county where you or the business were located when you signed. If you had no New York location and did not live in New York at the time, tell a lawyer; a New York filing may be open to challenge.
4. Before you sign a new offer, ask. You can ask a funder to remove the confession of judgment. Some may agree. If they refuse, factor that risk into the decision and compare the offer with other options using our New York MCA offer checker.

If a judgment has been entered against you

1. Find the filing. The judgment will be with the county clerk in the county named in the affidavit. Your bank should also be able to tell you who sent the restraining notice.
2. Call a lawyer this week. A lawyer can tell you whether the judgment can be vacated, for example because the residence requirement was not met, the affidavit was defective, or the underlying agreement was really a loan at a criminally usurious rate.
3. Do not ignore the funder. Even if you plan to fight the judgment, a negotiated payment plan or settlement may be possible, and it can stop a bank levy while you sort out the rest.
4. Read our guide to getting out of an advance for reconciliation, renegotiation and the options that usually make things worse.

The New York State courts publish free information for people facing a judgment; the CourtHelp site is a good place to start before you call a lawyer.

Where this comes from

• New York CPLR 3218, as amended effective August 30, 2019.
• New York State Senate, S2305 (2025-2026) and A7545 (2025-2026), bill status checked October 2026.
• New York Attorney General, case against Yellowstone Capital, and the January 2025 judgment and settlement.

Related: New York’s commercial finance disclosure law · how to read an MCA term sheet · MCA stacking · usury law and merchant cash advances · if a funder sues or freezes your account · UCC liens