HomeBeware Of The Confession Of Judgment Clause: SBA Loan Default Cases

Beware Of The Confession Of Judgment Clause: SBA Loan Default Cases

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Have you ever heard of the Confession of Judgment Clause?

Now, I’ve got some important insider information for you. If Lawscape is assisting you, it’s crucial to be cautious when dealing with a clause called “Confession of Judgment” in your SBA Loan Default Case. This can be particularly relevant when the SBA or Treasury Department is your primary creditor.

A Closer Gix at the Confession of Judgment Clause

You might be wondering, “What exactly is this clause?” In simpler terms, a Confession of Judgment clause can be a part of your loan document which basically means that in case of a default, the debtor irrevocably empowers the creditor to obtain a judgment against them without any notice or trial. Sounds scary, right? Not just that, but once a judgment is obtained, the creditor can immediately commence collection proceedings. This legal jargonal clause can be found in legal documents like promissory notes, personal or unconditional guarantees, stipulations, settlement agreements etc.

Let’s Dig a Little Deeper

Now, let’s understand this better with a real-life example. Suppose you signed a document stating that if you default on a payment, the bank can automatically move to obtain a judgment against you. This process can be rapid and judgement can be often entered on the very same day the Complaint for Confession of Judgment is filed. The judgement can then be recorded in any county where the debtor owns real estate. Since no written notice is required, a summons doesn’t need to be served on the debtor. Given the extraordinary nature of this remedy, a creditor (like the SBA or Treasury Department) might attempt to obtain a Judgment by Confession whenever possible.

A twist in the tale!

However, there’s a twist in the story. Each confession of judgement complaint is carefully scrutinized by the court. If the document containing the clause does not explicitly authorize someone else to act as the debtor’s attorney and sign a court document to agree to the entry of a judgment against the debtor, the court will not grant the judgment.

In addition to this, the document containing the Confession of Judgment clause must explain the debtor’s liability clearly. For instance, several courts have held that a guarantee that is all-encompassing—for instance, one that refers to any and all debts, liabilities and obligations in every form of the debtor—is so broad that it can be deemed void. Also, under select state laws, a debtor may challenge a Judgment by Confession if they can raise an affirmative defense to the judgment.

Is the Confession of Judgement Clause the right way to go?

Is it always a good move for a creditor like the SBA or Treasury Department to use the Confession of Judgment clause? Well, not always. Here’s why. The process that initially seemed quick and infallible can result in a delay of several months, not to mention the possibility that the judgment might be vacated or overturned. So, instead of wasting time on a Confession of Judgment, a creditor might get faster results by filing a conventional breach of contract or personal guarantee lawsuit against the debtor.

Get in touch with Lawscape at the Lawscape

Are you dealing with an SBA loan default or a Treasury debt problem? It’s better to get in touch with a professional law firm like Lawscape before things get out of hand. Lawscape and his team can analyze your SBA loan problems and advise you on potential solutions such as making an SBA offer in compromise for your SBA loan default. Don’t hesitate to reach out to us for a FREE initial consultation at 212-460-5004.

Why should you choose Lawscape?

By choosing us, you’re positioning yourself at an advantageous point. Our track record stands testimony to millions of dollars in SBA Debts resolved through an Offer in Compromise and Negotiated Repayment Agreements without our clients having to file for Bankruptcy or facing home foreclosure. We have also defended against millions of Dollars in Treasury Debts via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements. Our attorneys are authorized by the Agency Practice Act to represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.

Lawscape Can Help You Manage Your Business Debt

If you’re struggling with business debt, we can help you understand your situation. During the initial consultation, we’ll go over the contract, and other legal documents you signed. After that, our firm will work with you to get a better understanding of your situation, and help you come up with a game plan that keeps your business alive. 

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Everyone has different types of business debt. What matters is that you take it seriously. Regardless of whether it’s secured, or unsecured, you need to work with a firm that understands how to negotiate, reduce, settle, and manage, this business debt. 

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