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COJ Risk Calculator

Assess the legal risk of Confession of Judgment clauses based on merchant and funder state combinations.

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What Is a Confession of Judgment (COJ)?

A Confession of Judgment (COJ) is a legal clause in many MCA agreements that allows the funder to obtain a court judgment against the merchant without a lawsuit or hearing. The merchant signs the COJ at closing, and if they default, the funder files it with the court to immediately freeze bank accounts and levy assets. COJs were historically filed in New York courts regardless of where the merchant was located. In 2019, New York banned COJs filed against out-of-state merchants, but enforcement gaps remain. Other states have varying positions on COJ enforceability. Merchants are asking about COJs more often, and regulators are cracking down. Enter the state combination to see the risk level and enforceability for a specific deal.

How to Use This Calculator

Select merchant and funder states

COJ enforceability depends on both where the merchant is located and where the funder files. Cross-state COJs face more challenges than same-state filings.

Indicate whether the contract includes a COJ

Review the MCA agreement for a COJ or "Affidavit of Confession of Judgment" clause. It is typically a separate document signed alongside the main agreement.

Review the risk assessment

The calculator evaluates enforceability based on current state law, provides a risk level, and recommends whether the COJ clause should be a concern for the deal.

Key Concepts

Confession of Judgment

A pre-signed legal document that allows a creditor to obtain a court judgment without litigation. Historically common in MCA agreements, increasingly restricted by state law.

NY COJ Ban (2019)

New York CPLR 3218 was amended to prohibit filing COJs against out-of-state defendants. In-state COJs remain valid but face increasing judicial scrutiny. Other states have followed with their own restrictions.

Bank Freeze

When a COJ is enforced, the funder can obtain a restraining notice that freezes the merchant's bank accounts. This can be devastating to a business -- even if the judgment is later challenged, the freeze can cause immediate operational failure.

Expert Insights

COJ Is Increasingly Toxic for Reputation: The Bloomberg 2019 investigation into MCA COJ abuse created lasting negative press. Merchants now Google "confession of judgment MCA" and are alarmed. Funders that still rely heavily on COJs face more merchant resistance and regulatory scrutiny. As a broker, working with funders that have moved away from COJs or use them only as a last resort is a competitive advantage in merchant trust.

COJ Alternatives Are Emerging: Progressive funders have replaced COJs with personal guarantees, UCC enforcement protocols, and structured default resolution processes. These alternatives provide the funder with recovery options without the immediate, devastating bank freeze. Merchants are more willing to sign agreements without COJ clauses, which can improve your close rate.

Frequently Asked Questions

COJs remain legal in most states for same-state filings. New York banned out-of-state COJs in 2019. Several other states restrict or prohibit COJs. The legality depends on both the merchant's state and the filing state. Even where technically legal, courts are increasingly scrutinizing COJ enforcement for abuse.

Yes. A merchant can file a motion to vacate the judgment, arguing fraud, lack of consideration, or procedural defects. Vacating a COJ is possible but requires legal representation and takes time -- during which bank accounts may remain frozen. Prevention (negotiating out the COJ at signing) is far better than cure.

Yes. As a broker, you should explain the COJ clause to the merchant and its potential consequences. Do not serve as the merchant's attorney, but ensure they understand what they are signing. In states with disclosure requirements, the COJ must be specifically disclosed. Failure to disclose is a regulatory risk.

Results are estimates for educational purposes only. Actual amounts may vary based on your specific financial situation, market conditions, and other factors. This calculator does not constitute financial advice.