Q. What is a “confession-of-judgment clause”?
A “confession-of-judgment clause,” also called a “cognovit,” is a contract provision that lets a creditor appoint a lawyer for the debtor, who agrees to let the creditor take a judgment against the debtor. It usually reads something like this clause (taken from a promissory note):
Borrower hereby irrevocably authorizes and empowers any attorney-at-law to appear in any court of record and to confess judgment against Borrower for the unpaid amount of this Note as evidenced by an affidavit signed by an officer of Lender setting forth the amount then due, attorneys’ fees plus costs of this suit, and to release all errors, and waive all rights of appeal. …
Q. What is a “confession-of-judgment”?
A “confession of judgment” is a document signed by a lawyer that the creditor hires on behalf of a debtor. As the name of the document suggests, this lawyer agrees to appear in a lawsuit on behalf of the debtor, to waive notice on behalf of the debtor, and to agree to the entry of a judgment against the debtor.
Q. What is a “confession judgment”?
A “confession judgment” is a judgment entered by a court in response to the filing of a complaint based upon a document containing a confession-of-judgment clause.
Q. Can a lender take a confession judgment against a borrower without notifying the borrower that the lender has filed a lawsuit?
In Illinois, the short answer is yes. Illinois is one of a handful of states that allow confession judgments.
Q. How can debtors protect themselves against confession judgments?
We recommend several measures to protect against confession judgments:
Q. What can I do if a creditor takes a confession judgment against me?
Contact a lawyer immediately. Entry of a judgment can have disastrous consequences for the judgment debtor. It can:
Q. Are there limits to the use of confession judgments?
Yes. Illinois law requires the creditor to file a confession judgment suit only in counties where (1) the instrument containing the warrant of attorney was signed, (2) at least one debtor resides, or (3) any of the debtors own property. Illinois also bars confession judgments arising from consumer transactions.
Illinois case law also recognizes the extreme nature of the confession judgment remedy, and construes “confession-of-judgment clauses” strictly against the creditor and in favor of the debtor. At Schwartz & Kanyock, we regularly challenge the validity of confession judgments, using these rules to our clients’ advantage. These issues can be quite complex, and cannot be explained in a short blog.
If you find yourself in need of a better explanation, please call us today.