Our next 5 Minute Legal Master video will feature Bernstein-Burkley, P.C. attorney Nick Krawec. He will discuss Confessions of Judgment.
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Confession of Judgment can be a very powerful weapon in a Creditor’s Arsenal from the debtor’s point of view it can be a very onerous remedy.
One thing to keep in mind about confessions of judgment is that they can only be used in a commercial setting and for the most part never can be used involving consumer or consumer account. You may have heard of a confession of judgment by different names. It’s typically embodied as a clause in a judgment note. You may have heard of it as a cognovit note or a warrant of attorney. there’s a cognovit literacy warrant of attorney. In any event regardless of the name you put to it,each one of those documents we have a confession of judgment clause which provides certain remedies.
Now why did I say that can be a powerful weapon for creditor or an onerous remedy against the debtor? For the simple reason is that a confession of judgment note allows for the entry of judgment against the debtor or without any prior notice or hearing. Typically a confession of judgment note is used prior to the filing of a lawsuit the use of it a suit is filed will be a part another legal master presentation. I’m just going to look at it in terms of using the confession judgment note before you are in the law suit.
Judgment note or confession of judgment clause is often used in establishing an account, it can be used in credit applications, it can be used in guarantees, it can be used and has been used often in promissory notes as part of a loan transaction by lending institution. It can be used also by an attorney, we use them here often when a matter has been referred to counsel for collection,
This is a good tool, a judgement note, when payment arrangements are made by the debtor before is necessary to file suit presuming that the creditor who has referred the case for collection approves the payment arrangements.
What a judgment note can do is that memorializes the payment terms: sets forth the specific schedule and also, more importantly, sets forth the consequences that their faces in the event fo default in payment. The typical characteristically judgment note is the language that is used to establish that consequence in the event of default. You may have heard of the languages this is the undersigned hereby empowers any attorney of any court of record to appear for the undersigned and after one or more notices and after the default confessed judgment against the undersigned for the balance then due.
Typically a judgment would be confessed after a debtor has defaulted in payment. Alternatively you can negotiate in an arrangement with the debtor whereby the judgment can be confessed immediately. And either event the creditor would forbear from enforcing the judgment unless and until the debtor defaulted in its payment. You may want to use the immediate entry of judgment and forbearance if you are concerned about perhaps the debtor owning some real estate she might transfer before the payment is fully made. The immediate entry of the judgment in courts amicably a followed by payments also makes the judgment little bit more difficult to challenge.
You know if there is a history of payments made in strict accordance with the judgment note’s terms and then the debtor later defaults; it will be very difficult for the debtor to pull the tactic of I’m going to challenge the entry of judgment. Well, he’s established a history for what the payments are providing for, what notice provided for and it seems to be right along with what has been agreed upon. What’s required on a confession of judgment is that obviously the confession of judgment clause must be conspicuous.
You should include the language that the debtor is knowingly voluntarily and intelligently waived his rights to a notice and hearing prior to judgment if counsel is present in that negotiation. Specify that it was after consultation council. The signature of the debtor obligor must relate directly to the confession of judgment clause of you have debtor sign on two spots one right after the class itself and one at the end of the note. You cannot hide should not try to hide the confession of judgment clause on a separate page or the back of a credit application and don’t try to incorporate by reference in another document so the bottom level this is that confession a judgment can be very powerful weapon. Use it wisely, know the requirements and make sure you comply with requirements to make enforceable.