What is a Confession of Judgment provision in a commercial loan document?

A confession of judgment provision allows a lender to enter a judgment against the borrower for the outstanding balance of the underlying debt without having to first prevail in a lawsuit against the borrower. While the borrower has the opportunity to litigate the validity of the judgment afterwards, these provisions give the lender a substantial advantage in collecting a debt that the lender claims to be in default. Most confession of judgment provisions state that the lender can only enter a judgment if the borrower is in default. A few more aggressive lenders do not include this requirement. A borrower should object strenuously to a confession of judgment clause that is not predicated upon an event of default. Many states prohibit confession of judgment provisions absolutely, while Pennsylvania does not allow them in consumer transactions.

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