8 Grounds for Vacating a Confession of Judgment

This is the most straightforward ground, and it applies to a massive number of MCA borrowers.

In 2019, New York amended CPLR § 3218 to ban the filing of confessions of judgment against anyone who doesn't reside in New York State. Period. If your business is in Texas, Florida, California, Georgia — anywhere outside New York — and the COJ was filed after August 30, 2019, it is voidable on that ground alone.

Before this law passed, MCA funders were filing thousands of COJs in a handful of New York counties against out-of-state business owners who had no practical way to defend themselves. Bloomberg Businessweek's 2018 investigation exposed the scale of this, and the legislature responded.

But here's the thing. Some funders still do it. They rely on you not knowing the law changed. Or they use creative workarounds — choice-of-law provisions, venue manipulation, alternative legal pathways. An experienced attorney will catch this immediately.

If you're out of state and a COJ was filed against you in New York after August 2019, that's your fastest path to vacatur. Full stop.

CPLR § 3218 requires a "wet ink" notarized signature. Not a digital signature. Not a document "signed under penalty of perjury." A real, physical, notarized affidavit.

This matters more than you think. MCA agreements are produced in volume. They're processed fast. And funders frequently use affidavits that were signed under penalty of perjury (which is acceptable under federal law and some state laws) instead of getting an actual notarization. Under New York law, that's not good enough.

If the notarization is defective — wrong notary, expired commission, no notarization at all — the COJ is facially deficient. The funder filed a bad document with the court, and the judgment that came out of it is invalid.

The confession of judgment affidavit must state the county where you resided when it was executed. And it must be filed in that county (or the county where you resided at the time of filing, if you moved within New York).

File it in the wrong county, and the whole thing falls apart. In Davis v. Argus Capital Funding, a New York court held that altering a COJ to reflect the correct county was not a permissible "ministerial correction" — the entire confession was invalid.

This is one of those errors that sounds trivial until you realize it kills the judgment. Funders fill in county designations from templates. They get them wrong. They list the county where their office is instead of where you live. They leave it blank. Any of those is a ground for vacatur.

There's a clock on this. Under CPLR § 3218, a confession of judgment must be filed within three years of when it was signed. After three years, it's expired. Done.

Most MCA agreements are short-term — 6 to 18 months. But funders don't always file the COJ immediately at default. Sometimes they wait. Sometimes they're dealing with other borrowers first. Sometimes they just lose track of the timeline. And if more than three years have passed between the date you signed that affidavit and the date they filed it with the county clerk, it's void.

This one is purely a matter of checking dates. Your attorney pulls the filing, compares it to the execution date, and if the math doesn't work, neither does the judgment.

The affidavit must state the specific sum for which judgment may be entered. And that number has to be accurate.

Here's where funders get sloppy — or dishonest, depending on how generous you're feeling. They frequently overstate the amount owed by failing to credit payments you've already made. They add fees that aren't authorized under the agreement. They inflate the "purchased amount" without accounting for the daily ACH debits that were successfully collected before the default.

If the amount on the COJ doesn't match what you actually owe under the contract, that's a defect. And it's not a minor one. The entire purpose of the affidavit is to demonstrate that "the sum confessed is justly due." If the number is wrong, that requirement is unmet, and the judgment is vulnerable.

This one sounds obvious but it happens more than you'd expect. The funder claims you defaulted. But you didn't.

Maybe you were making payments as agreed. Maybe you missed one ACH and caught up the next day. Maybe you triggered a "technical default" (like switching a credit card processor) that the funder is now using as justification to accelerate the full balance — even though your actual payment stream was never interrupted.

Under CPLR Rule 5015, if the triggering event (the alleged default) never actually occurred, the COJ filing was improper. The funder lied on the affidavit, or at minimum, filed it based on a default that doesn't hold up under the terms of your own agreement.

This ground requires your attorney to go line by line through the MCA contract, compare the default definition to what actually happened, and demonstrate that the funder jumped the gun. It's not the fastest defense, but it's one of the most powerful, because it attacks the factual basis for the entire filing.

This is the big one. And it's getting more traction in New York courts every year.

Here's the background. MCA funders structure their agreements as "purchases of future receivables," not loans. This is deliberate, because if it's a purchase, usury laws don't apply. There's no interest rate to cap. They can charge whatever they want.

But courts are increasingly looking past the contract language and examining what actually happened. If the funder was taking fixed daily payments regardless of your revenue, if the "reconciliation provision" (the clause that's supposed to adjust payments based on your actual sales) was illusory, if the agreement had a finite repayment term, and if the funder had full recourse against you personally even if you went bankrupt — that's not a purchase. That's a loan. And if the effective annual interest rate exceeds 25% (the criminal usury threshold under NY Penal Law § 190.40), the entire agreement is void.

A void contract means a void confession of judgment. The funder can't enforce a COJ that's based on an agreement that never should have existed.

In Funding Metrics, LLC v. D&V Hospitality, Inc., the Westchester County Supreme Court did exactly this — vacated the COJ and voided the entire MCA agreement as criminally usurious. The court looked at the funder's actual servicing practices, not just the contract language. The Appellate Division reversed on procedural grounds (the merchant should have filed a plenary action instead of a motion), but the substantive legal theory remains valid and is being used in cases across New York.

This defense requires more work — a plenary action, not just a motion to vacate — but it doesn't just kill the COJ. It kills the entire debt.

If the funder lied to you about the terms. If they buried the COJ clause in fine print and told you it was "standard paperwork." If they pressured you into signing under duress — your business was about to fold, they knew it, and they exploited that desperation. If they submitted false information to the court in the affidavit supporting the COJ.

Any of that is a ground for vacatur under CPLR § 5015(a)(3), which allows courts to set aside a judgment based on fraud, misrepresentation, or other misconduct.

This is also a plenary action, not a simple motion. You're essentially saying the funder committed fraud in obtaining the judgment, which is a heavier lift than pointing out a procedural defect. But when the facts support it, courts take it seriously.

Some funders made borrowers sign confessions of judgment without explaining what they were. Some funders had their own employees notarize the document (which creates obvious conflicts). Some funders fabricated default triggers to justify filing the COJ early. All of that is fair game.

Fast. Faster than you think.

In many jurisdictions you have 30 days to file a motion to vacate. Miss that window and your options shrink dramatically. Some of these grounds (like jurisdictional and procedural defects) can be raised through a straightforward motion under CPLR § 5015. Others (like usury and fraud) require a separate plenary action, which takes longer but isn't subject to the same tight deadline.

The point is this: every day you wait gives the funder more time to freeze your accounts, intercept your receivables, and choke your cash flow. The defenses exist. They're real. Courts vacate confessions of judgment regularly. But they don't vacate themselves.

If a COJ has been filed against you, get an attorney who knows CPLR § 3218 inside and out. Not a generalist. Not someone who "also handles" MCA cases. Someone who does this specifically, who has seen the template errors, who knows which courts are receptive to which arguments, and who can file an emergency order to show cause within 24 to 48 hours to get your accounts unfrozen while the vacatur motion proceeds.

The funder moved fast against you. You need to move faster.