A confession of judgment clause may allow a creditor to seek a judgment immediately against the debtor if the debtor fails to pay an obligation. Confession-of-judgment clauses, by which a debtor waives most rights to contest a debt, often appear in contracts, promissory notes, guaranties and other agreements. Signing a confession-of-judgment clause may help a debtor get credit not otherwise available. But although the confession-of-judgment clause is designed to streamline collections, enforcing one is not always simple or easy.
Under Illinois law, confessions of judgment have limited use. For one thing, they are not permitted in consumer transactions, namely those concerning goods or services primarily for personal, family or household use. Even in commercial transactions, confessions receive strict scrutiny because courts do not favor judgments obtained without the defendant receiving notice or the opportunity to participate in the court proceeding.
To enforce a confession-of-judgment clause, the creditor files it in court in the county in which the note or other obligation was executed or in a county where one or more of the defendants reside or own real or personal property. The court can then enter a judgment against the defendants, which has the same force and effect as a judgment won at trial. This allows the creditor holding the judgment to pursue collection measures, such as garnishing wages and levying on bank accounts and other property.
In some instances, a creditor must follow an additional process before proceeding with collection. If the creditor wants the debtor’s wages deducted to satisfy the debt, the confession must first be confirmed to the debtor. Confirmation means serving the debtor with a summons and notice of the enforcement action. After that, the creditor serves the debtor’s employer with a wage deduction summons and the debtor is also served with notice of the intent to impound wages.
Even with a confessed judgment in hand, creditors may face further hurdles that require the assistance of an experienced debtor and creditor attorney. A defect with the confession-of-judgment clause may result in the invalidation and vacature of the judgment. Likewise, Illinois court rules provide a mechanism for a debtor to “open” a confessed judgment and assert various defenses to the underlying debt in certain cases. Courts are often receptive because of their concern for due process and their general dislike of default judgments. Courts may invalidate confession judgments if the judge cannot determine the amount owed from the face of the instrument containing the confession-of-judgment clause. Creditors also sometimes do not follow the proper procedures to enforce confession-of-judgment clauses. Even when the creditor does everything properly, the case may drag on.
Schwartz & Kanyock, LLC in Chicago is a full-service commercial litigation and debtor/creditor law firm. Our attorneys are highly experienced in obtaining or defending confession of judgment cases. If your company has a debt collection or credit dispute issue to resolve, please contact us online or call 312-436-1442 for an initial consultation.