Confession of judgment” is an agreement by a party to a lease or promissory note that in the event of a default, the other party, usually a landlord or lender, may proceed to the county courthouse, declare a default and enter judgment immediately in an agreed amount. The defaulting party does not receive the benefit of a trial.
The confession of judgment procedure, although not unique to Pennsylvania, is unusual in the United States. It allows a contracting party immediate access to a judgment and seizure and sale of assets of a defaulting party to satisfy the judgment.
Recent court decisions have limited the ability of a judgment creditor to seize immediately bank accounts or other property of the debtor in the hands of third parties; however, a judgment creditor still may exercise any other remedies directly against the debtor, including seizure of the debtor’s property.
Because of the extraordinary power afforded to a creditor under a confession of judgment provision, the courts have expanded the rights of debtors in recent years. A debtor may have a judgment opened if, in a petition to the court, he can raise an issue of material fact as to the propriety of the entry of the judgment in the first place. If an issue of fact is raised in a petition, the judgment will be opened and the case will proceed to trial like any lawsuit. A debtor may also petition to strike a judgment in the event there is a defect in the form of a judgment on its face.
Lenders and landlords routinely insist upon a confession of judgment clause because it is a powerful remedy in the event of default. If you are a lender or landlord, you will want such a clause.
Borrowers and tenants should be careful about executing documents containing a confession of judgment provision as their rights might be significantly impaired in the event of a dispute.
The confession of judgment procedure, although not unique to Pennsylvania, is unusual in the United States. It allows a contracting party immediate access to a judgment and seizure and sale of assets of a defaulting party to satisfy the judgment.
Recent court decisions have limited the ability of a judgment creditor to seize immediately bank accounts or other property of the debtor in the hands of third parties; however, a judgment creditor still may exercise any other remedies directly against the debtor, including seizure of the debtor’s property.
Because of the extraordinary power afforded to a creditor under a confession of judgment provision, the courts have expanded the rights of debtors in recent years. A debtor may have a judgment opened if, in a petition to the court, he can raise an issue of material fact as to the propriety of the entry of the judgment in the first place. If an issue of fact is raised in a petition, the judgment will be opened and the case will proceed to trial like any lawsuit. A debtor may also petition to strike a judgment in the event there is a defect in the form of a judgment on its face.
Lenders and landlords routinely insist upon a confession of judgment clause because it is a powerful remedy in the event of default. If you are a lender or landlord, you will want such a clause.
Borrowers and tenants should be careful about executing documents containing a confession of judgment provision as their rights might be significantly impaired in the event of a dispute.
– Bill Brennan