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Confession of Judgment: How Does It Work; Can It Be Vacated

February 10, 2017

New York law permits a confession of judgment, meaning that if a debtor signs an affidavit permitting the creditor to file a judgment upon a bona fide debt, the creditor can file the judgment immediately, without a lawsuit, depending on the terms in the affidavit.

The affidavit must state the residence address of the debtor. If the debtor resides in New York State, the confession of judgment can only be entered in the county in which the debtor resides. If the debtor resides out of state, the judgment can only be entered in the county authorized in the affidavit. Even though the statute says “the county” in which such a judgment may be entered” there is no court decision stating that if more than one county or even all the counties of New York are authorized by the affidavit that the judgment cannot be entered in any of them.

In 1917, New York’s highest court affirmed that if a confession of judgment was based on a usurious loan it could be set aside by motion.

Later courts have stated that a separate lawsuit by the debtor was required to set aside the confession of judgment.

A motion is all that was required if the debtor claimed that his affidavit was forged.

Where there is only a legal issue with no factual dispute of whether fraud or misconduct resulted in the confession of judgment, the most recent appellate opinion indicated that a lawsuit was not required but a motion might suffice.

Based on this opinion, another court held that a motion was sufficient to vacate the confession of judgment if the debtor showed that entry of the judgment violated the affidavit that the debtor signed.

At the end of 2016, a court granted a motion to vacate a confession of judgment on the ground that it was based on a merchant cash advance agreement that was really a usurious loan.

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