Pennsylvania is one of the few states that allows judgment to be entered by confession in connection with a commercial credit transaction. Obtaining judgment by confession is desirable for a creditor in that it is usually easier, faster, and less costly than acquiring judgment through normal litigation procedures. There are several factors which contribute to the usefulness of a confessed judgment:
- Potentially Reducing Court Time and Attorney Expenses – Because the entering of a judgment by confession is performed by the Prothonotary, the judgment is of record as soon as it is filed by the creditor’s attorney. This single act through the warrant of attorney avoids the adversary litigation that may ensue through normal litigation procedures. The creditor can quickly attempt to collect on the debt owed.
- Shifting Burden – Once a judgment is entered by confession, there is a presumption that it is a valid judgment. The judgment-debtor has the initial burden of proving that the judgment should be open or stricken, should the debtor seek to attack the judgment. Instead of the creditor needing to prove its case, the debtor is required to do so in order to have the judgment opened. A debtor seeking to open a confessed judgment must demonstrate that there is evidence of meritorious defenses to survive a directed verdict motion and reach a jury.
- Locks Lien Priority – The date that the judgment is entered by confession locks in the creditor’s lien priority on real estate on which the creditor does not already have a mortgage. The judgment acts as a general lien against all real property owned by the debtor in the county where the judgment is entered. This is distinguishable from a mortgage, which is a specific lien against a particular piece of real property. Lien priority may become important in subsequent foreclosure or bankruptcy proceedings, as the priority affects when and if a creditor will be paid through a bankruptcy or sheriff sale of real property. The confession of judgment clause is an important tool for obtaining security for an otherwise unsecured debt.
- The Mere Filing Of A Petition To Strike And/Or Open A Confessed Judgment Does Not Act As An Automatic Stay– a debtor wishing to remove a confessed judgment must act promptly and present evidence of meritorious defenses. However, the mere filing of a petition to open or strike does not automatically affect the lien of the judgment or the right to execution. The debtor must request and obtain from the court a stay of execution in order to halt the creditor’s rights of execution.
A warrant of attorney to confess judgment is one of the most powerful clauses in a contract due to its power, as outlined above, to divest the debtor of constitutional rights and procedural protections. Therefore, courts strictly construe the language of a warrant of attorney and a creditor must be certain to follow specific procedures when obtaining a contract with a confession clause. If you are a creditor who needs assistance with drafting a contract with the power to confess judgment, the law offices of Unruh Turner Burke & Frees may be able to assist you.