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CONFESSION OF JUDGMENT

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WHAT IS A CONFESSION OF JUDGMENT?

1. What Is A Confession of Judgment?

A confession of judgment is a process whereby a creditor asks a debtor to agree to sign a legally binding monetary judgment against the debtor. Although no lawsuit is filed, a confessed judgment has the exact same legal effect as a judgment by a judge or jury. The judgment only takes effect if it is eventually filed in court, however, if it is filed, it can be used as a basis to start collection proceedings against the debtor, including the garnishment of wages.

2. What Are the Advantages of Agreeing to a Confession of Judgment?

Confessions of judgment are usually signed as part of a settlement agreement that provides for the debtor to pay off the debt over time. In such a situation, the confession of judgment is not actually filed in court unless and until the debtor defaults on the payments. If the debtor pays off the debt as agreed, the confession of judgment is never filed. Accordingly, a confession of judgment can buy a debtor time to pay off a debt.

Another advantage of agreeing to a confession of judgment is the
avoidance of the time and expense of litigation. If a contract contains a provision for attorneys’ fees and a lawsuit is filed, not only might a debtor end up with a judgment for the amount of the contract, but could also be liable for the creditor’s attorneys’ fees and litigation costs. In some instances, those costs could easily run into the tens of thousands of dollars. As such, a confession of judgment might actually limit a debtor’s financial exposure.

3. What Is the Disadvantage of Agreeing to a Confession of Judgment?

The disadvantage of a confession of judgment is that a valid and filed confession of judgment is final and binding. A debtor loses the ability to argue to a judge or jury that they do not owe the amount of the confessed judgment. Generally speaking, unless the confession of judgment was obtained by fraud, you’re stuck with it.

4. Are some confessions of judgment dischargeable in bankruptcy?

Yes. Some confessions of judgment are eligible to be discharged in bankruptcy. Most notably, most consumer debts are dischargeable in bankruptcy, Note, however, that certain debts, including but not limited to child support and alimony, mortgages, criminal fines, are not typically discharged in bankruptcy. Accordingly, if the underlying obligation supporting the confession of judgment falls into a restricted category, then the confession of judgment is likely not dischargeable as well.

5. Why do I need to hire an attorney?

Because confessions of judgment are only appropriate in limited circumstances, California requires the involvement of an independent attorney to review the debtor’s situation and ensure that the debtor has a clear understanding of the consequences of signing a confession of judgment, including waiving the debtor’s rights to dispute the debt.

6. What does the attorney need to do?

California requires that the attorney:

(1) Review and examine the proposed judgment;
(2) Advise the debtor/defendant with respect to the rights and defenses that are waived when the debtor/defendant signs the judgment;
(3) Affirmatively advise the debtor/defendant to proceed with the confession of judgment procedure; and
(4) Sign a certificate stating that attorney has done all of the above.

7. What does the debtor need to sign?

The debtor must sign a statement:

(1) Authorizing the Court to enter a judgment against the debtor/defendant;
(2) State the exact amount of the judgment;
(3) Concisely state the facts out of which the debt became due; and
(4) Show that the confessed amount is justly due.

Generally speaking, the attorney for the creditor will draft the statement that the debtor needs to sign. The debtor’s attorney will then review it for accuracy.

8. Can Confessions of Judgment be signed for “contingent” liabilities?

Yes. California allows for confessions of judgment based on contingent liabilities. However, extra caution must be used in such circumstances to make sure that the judgment only becomes effective if, and only if, the contingency occurs.

9. Does a Confession of Judgment have to be immediately filed with a Court?

No. A Confession of Judgment can be signed and used as part of a payment plan. However, the creditor/plaintiff has the ability to submit the judgment to the Court without notice to the debtor/defendant, without a hearing, and without an opportunity to defend. This is another reason utmost caution must be used before agreeing to a confession of judgment.

10. What do I need to do?

If you have been approached by a creditor to enter into a Confession of Judgment, you should contact a California-licensed attorney to give you advice as to whether a Confession of Judgment is appropriate under the circumstances and, if so, to guide you through the process as well as sign the necessary certificate.

Entering into a Confession of Judgment is not something to be taken lightly. Under some circumstances, however, it can be an appropriate and useful tool to settle a debt without the time and expense of litigation.

CALIFORNIA’S CONFESSION OF JUDGMENT STATUTES

CODE OF CIVIL PROCEDURE – CCP
PART 3. OF SPECIAL PROCEEDINGS OF A CIVIL NATURE [1063 – 1822.60]
  ( Part 3 enacted 1872. )
TITLE 3. OF SUMMARY PROCEEDINGS [1132 – 1179.07]
  ( Title 3 enacted 1872. )

CHAPTER 1. Confession of Judgment Without Action [1132 – 1134]
  ( Chapter 1 enacted 1872. )

1132.

(a) A judgment by confession may be entered without action either for money due or to become due, or to secure any person against contingent liability on behalf of the defendant, or both, in the manner prescribed by this chapter. Such judgment may be entered in any superior court.
(b)A judgment by confession shall be entered only if an attorney independently representing the defendant signs a certificate that the attorney has examined the proposed judgment and has advised the defendant with respect to the waiver of rights and defenses under the confession of judgment procedure and has advised the defendant to utilize the confession of judgment procedure. The certificate shall be filed with the filing of the statement required by Section 1133.
(Amended by Stats. 2002, Ch. 784, Sec. 77. Effective January 1, 2003.)
1133.

A statement in writing must be made, signed by the defendant, and verified by his oath, to the following effect:
1. It must authorize the entry of judgment for a specified sum;
2. If it be for money due, or to become due, it must state concisely the facts out of which it arose, and show that the sum confessed therefor is justly due, or to become due;
3. If it be for the purpose of securing the plaintiff against a contingent liability, it must state concisely the facts constituting the liability, and show that the sum confessed therefor does not exceed the same.
(Enacted 1872.)
1134.

(a) The statement required by Section 1133 shall be filed with the clerk of the court in which the judgment is to be entered, who must endorse upon it, and enter a judgment of the court for the amount confessed with the costs provided in subdivision (b).
(b) At the time of filing, the plaintiff shall pay as court costs that shall become a part of the judgment the fee as provided in subdivision (b) of Section 70626 of the Government Code. No fee shall be collected from the defendant..
(c) The statement and affidavit, with the judgment endorsed thereon, together with the certificate filed pursuant to Section 1132, becomes the judgment roll.
(Amended by Stats. 2005, Ch. 75, Sec. 40. Effective July 19, 2005. Operative January 1, 2006, by Sec. 156 of Ch. 75.)
The above statutory provisions are “exclusive” and “strictly construed” and a failure to abide by them will render the Confession of Judgment void.