Confession Of Judgment

You hate the law so much that showing up to court isn’t for you. So, you end up losing a case by signing an arcane clause that automatically leads you to confess your guilt.

Yeah. Pay attention. This is an absolutely bonkers legal statute.

As the name implies, a confession of judgment is a clause that states you will plead guilty and agree to pay a debt that you owe in the event that you miss a payment, or create conditions in which the creditor has doubts about your ability to pay.

This clause is a powerful tool for creditors (those who lend out money) as they can avoid lengthy court proceedings to resolve a dispute. These clauses are usually signed up front before they take out the loan.

Once the borrower signs a confession of judgment, they agree to pay the amount they owe plus any damages. They also forfeit the right to dispute the agreement in the future.

If they don't pay the money back, the lender can use the document to collect without having to resort to legal proceedings. This means that they can raid the business owners’ bank accounts.

This is often part of a loan agreement if a small business wants to set up a line of credit with a bank, or if a vendor wants to extend credit to a customer who has a bad credit history.
If the borrower still does not pay after the confession of judgment, the lender can garnish their wages or put a lien on their property.

Example:

Let’s say We Give Credit Inc. wants to sell auto parts to Joe’s Repair Shop. Joe has just started his business and doesn’t have a lengthy credit history, so We Give Credit is a little nervous about selling to him at net 30 days. So, they ask Joe to sign a confession of judgment that says if he does not pay, they can put a lien on his repair shop or garnish his bank account. Joe is happy to sign, even though he is giving up a constitutional right to a trial if a dispute arises re: how much he owes in the future.