By: Lance T. Denha, Esq.
Generally, when a party defaults upon a contract, you can be assured of a lengthy and costly battle in court to enforce its rights. Creditors of all sorts: whether landlords, lien holders, or other type of security interests holders would like nothing more when a default against the debtor transpires, to avoid having to go the litigious stages in order to obtain a judgment to pursue collections against the defaulted debtor. This is where a Confession of Judgment comes in handy to avoid the time, effort and money required to obtain that judgment.
Confession of Judgment is a term referred to under contract (or specific clauses) where one party agrees to allow the other party to enter a judgment against him, her or his or her entity. These types of contracts are highly controversial in nature and only permitted in a few states. Michigan being one of the states permitting Confession of Judgments, will not enforce these types of judgment unless they are specially labeled and distinct from the contract initially agreed upon. The controversial nature of these types of judgment, in which other states have upheld, is that it does not afford a debtor due process
While only available in select jurisdictions such as Michigan, a confession of judgment clause can be a quick and cost efficient way to ensure your ability to enforce a defaulted agreement. In order to properly utilize this mechanism, it is highly advisable to consult with a skilled attorney in this legal arena to ensure the agreement is in compliance with the state laws and any local jurisdictional requirements before incorporating into any such agreement. If this is done properly you can avoid the most burdensome aspects of litigation and pursue collection in a swift and cost efficient manner.