Confession of Judgment in New York - Romano Law

Confession of Judgment in New York

Confession of Judgment in New York

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Updated: January 25, 2022

A confession of judgment is an instrument used to secure the full payment of an agreed upon settlement amount.  It often arises when one party to a settlement agreement has concerns about the other party’s ability to provide full payment.  Usually, this is in instances where the settlement amount is broken into multiple, smaller payments that are due over an extended period.  New York, like many other states, has its own specific procedures for obtaining confessions of judgment. 

What Exactly is a Confession of Judgment?

A confession of judgment is a signed acceptance of a legal obligation that can be used to obtain unpaid settlements, while avoiding the time and expense of litigation.  For purposes of this article, the party who owes money and executes the confession of judgment is the debtor and the party who is owed money is the beneficiary.  Once executed, confessions of judgment are usually held in escrow by the beneficiary’s attorney.  If the beneficiary is not paid under the settlement agreement, the beneficiary can file the confession of judgment with a county clerk who will enter judgment against the debtor.  Thus, confessions of judgment allow beneficiaries to bypass filing a costly and lengthy lawsuit for breach of the settlement agreement and proceed to directly entering a judgment.

Put simply, a confession of judgment’s signatory admits to the court that they are responsible for the agreed upon amount of money or other value.

How are Confessions of Judgment Entered? 

In the event the debtor fails to abide by their settlement obligations, the beneficiary may properly file the confession of judgment with the county clerk.  Once filed, the beneficiary can enforce the confession of judgment.  It is an easy process if there are no mistakes – but be diligent – mistakes as minor as a misspelled name can slow the enforcement process.

In New York, when filing the confession of judgment, the beneficiary will need a few extra documents – a proposed judgment for the clerk to sign, an affidavit from the plaintiff confirming the facts, and a bill of costs.  The clerk may also deduct amounts already paid from the judgment if the debtor partially complied.  Oftentimes, the clerk will also ask for additional information, such as any written agreements that authorize the enforcement of the judgement in the event of a breach.

When Are Confessions of Judgment Most Useful?

Often, they are used as part of a settlement agreement.  For example, if the debtor owes the beneficiary $10,000 and does not pay, the beneficiary can have the debtor agree to a payment plan for the amount owed and both parties can sign a settlement agreement.  In tandem, to secure payment over a long period of time, the debtor signs a confession of judgment in the amount of $10,000.  Then, if the debtor breaches the settlement and refuses to pay the $10,000, the beneficiary can enforce the entire judgment.  This acts as a great deterrent against non-payment because the beneficiary does not have to file a lawsuit to enforce the settlement agreement if the debtor breaches.

Keep in mind that the clerk will deduct any amount that’s already been paid.  So, if the debtor has already paid the beneficiary $5,000 under a settlement agreement, the most the beneficiary can receive, in this example, is $5,000.

Limitations on Confessions of Judgment 

To be enforceable, a confession of judgment must be filed within three years of its execution.  

Generally, since August 30, 2019, confessions of judgment executed by non-New York residents are unenforceable.  Government agencies are exempt from this rule and may file confessions of judgment against any individual or entity in any county of New York, no matter if they are a New York resident.

Confessions of judgment must also state the county in New York where the defendant resided when it was executed.  The plaintiff may only file the confession in that county, or, if the defendant has moved to a different county after execution, the county where the defendant resided at the time of filing.

As noted in the Practice Commentaries of CPLR 3128, “residence” and “domicile” have different meanings.  A party has one domicile, but it may have multiple residences.  Further, non-natural persons, such as corporations, LLCs and other business entities “reside in any county where it has a place of business” instead of just the county where their headquarters is located.  Thus, it is important for the beneficiary to research all the party’s residences before deciding if they may obtain a confession of judgment against them.

Vacating a Confession of Judgment

In some cases, the debtor may seek to vacate a confession of judgment to avoid post-filing consequences.  Debtors may argue that a “triggering event,” such as defaulting on payment, did not actually occur.  Additionally, if the beneficiary does not file the judgment within three years of the debtor’s execution, the debtor can argue that the confession of judgment should be vacated on grounds of untimeliness.  But, because of the streamlined process for enforcing a confession of judgment, the debtor may not allege fraud, duress or overreaching to vacate the judgment.  These defenses must be asserted in a separate legal action. 

As noted, collecting on a confession of judgment can be challenging if it was not properly drafted. For example, under the CPLR, confessions of judgment that include an “amount certain” – a specific amount of money that is owed to the beneficiary – must include an affidavit stating the facts of how the debt arose.  Further, these facts must be presented in “sufficient genuine detail to enable other creditors to investigate the claim and ascertain its validity.”

Although this requirement is meant to protect third parties that “might be prejudiced in the event that a collusively confessed judgment is entered,” debtors have also tried to use this requirement to vacate confessions of judgment entered against them.  The Appellate Division for the Second Department, however, has refused to allow debtors to use the specificity requirement to vacate confessions of judgments, citing the policy that the requirement is meant to protect innocent third parties, not debtors.  See generally Balahthis v. Shakola, 148 N.Y.S.3d 912 (2d Dep’t 2021).

Conclusion 

Confessions of judgment are a powerful legal tool.  They can provide an extra layer of security in the event of a debtor default.  When settling any legal dispute – whether it involves a confession of judgment or not – it is important to consult with an experienced  .

Photo by Romain Dancre on Unsplash

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This Blog is made available by Romano Law PLLC for general informational and educational purposes only, not to provide specific legal advice. By using this Blog you understand that there is no attorney client relationship between you and Romano Law PLLC or any individual contributor. You should consult a licensed professional attorney for individual advice regarding your own situation.

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