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September 20, 2023 | BusinessLitigationNew York

Confession of Judgment in New York

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Author(s)
Andrew Ramstad

Associate Attorney

Jari Wilson

Associate Attorney

A confession of judgment is a legal instrument used to ensure full payment of a pre-agreed settlement amount.  It is often used in cases where one party has concerns about the other party’s ability to provide the full payment, particularly when the settlement amount is broken into multiple smaller payments due over an extended period.  In New York, as in many other states, there are specific procedures for obtaining confessions of judgment.

What Exactly Is A Confession of Judgment?

When one party executes a confession of judgment, they are signing an acceptance of legal obligation, admitting that they are responsible for paying the agreed-upon amount.  This signed document can be used to obtain unpaid settlements, without the time and expense of litigation.  Once executed, the confession of judgment is usually held in escrow by the beneficiary’s attorney, who can file it with the county clerk if the debtor fails to make the agreed-upon payments.  This allows the beneficiary to bypass the need to file a lawsuit for breach of the settlement agreement and proceed directly to entering a judgment.

How Are Confessions Of Judgment Entered?

In New York, the beneficiary must file 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 any amounts already paid from the judgment if the debtor has partially complied.  Additionally, the clerk may ask for additional information, such as written agreements that authorize the enforcement of the judgment in case of a breach.

When Are Confessions of Judgment Most Useful?

Confessions of judgment are often used as part of a settlement agreement to secure payment over a long period of time.  For example, if the debtor owes the beneficiary $10,000 and does not pay, the parties can sign a settlement agreement that includes a payment plan for the amount owed, and the debtor can sign a confession of judgment in the amount of $10,000.  If the debtor breaches the settlement and refuses to pay the $10,000, the beneficiary can enforce the entire judgment, acting as a strong deterrent against non-payment.

Limitations On Confessions of Judgment

There are limitations to the use of confessions of judgment.  To be enforceable, a confession of judgment must be filed within three years of its execution.  Since August 30, 2019, confessions of judgment executed by non-New York residents are unenforceable, but government agencies are exempt from this rule and may file confessions of judgment against any individual or entity in any county of New York.  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.

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 occur, or that the confession of judgment should be vacated on grounds of untimeliness if the beneficiary does not file the judgment within three years of the debtor’s execution.  However, the streamlined process for enforcing a confession of judgment means that the debtor may not allege fraud, duress, or overreaching to vacate the judgment.  These defenses must be asserted in a separate legal action.

Conclusion

In summary, a confession of judgment is a useful legal instrument for securing payment of a settlement agreement.  However, there are limitations to their use, and proper drafting is essential to avoid challenges in collecting on the confession of judgment.  Consult with an experienced attorney to help guide you.

 

 

Photo by Scott Graham on Unsplash
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