One of the most powerful weapons in a creditor's arsenal is a confession of judgment. This provision—sometimes used in promissory notes, guaranties and other documents obligating someone to make payments—says that if a monetary default occurs, the defaulting party agrees to the entry of a judgment by a court without notice or a trial. Once a judgment has been obtained, the creditor may quickly begin collection proceedings.

A confession of judgment is a statutory procedure specifically recognized by the Illinois courts. The power to confess a judgment must be clearly stated in a document that is signed by the debtor. A complaint to confess judgment, supported by an affidavit as to the amount due, must be filed in the county in which the note or obligation was executed, a county in which one or more of the defendants reside, or any county in which the debtor's real or personal property is located.

The process of obtaining a judgment moves quickly. Often, a judgment is entered on the same day that a complaint for confession of judgment is filed. That judgment may then be recorded in any county in which the debtor owns real estate. Because no notice is required, a summons need not be served on the debtor.

Given the extraordinary nature of this remedy, a creditor might conclude that it should attempt to obtain a judgment by confession whenever possible. There are, however, compelling reasons why this may not be the case.

First, a court will carefully scrutinize every confession of judgment complaint, particularly in these challenging economic times. If the note, guaranty or other obligation that contains the provision does not specifically empower someone to act as the debtor's attorney and sign a court document agreeing to the entry of a judgment against the debtor, the judgment will not be granted. Likewise, the document containing the confession of judgment clause must clearly describe, and in some cases limit, the extent of the debtor's liability. Numerous courts have held that a guaranty that is all-encompassing—for example, one that refers to any and all debts, liabilities and obligations of every nature or form of the debtor—is so broad as to be void.

Second, Illinois law provides that a debtor may move to "open," or challenge, a judgment by confession if the debtor can raise a valid defense to the judgment. If, at the hearing on the motion, it appears that the debtor has a valid defense to all or a part of the creditor's claim, the court must set the matter for trial. Suddenly, the procedure that once seemed bulletproof has now resulted in a delay of at least several months, with the distinct possibility that the judgment will be vacated. Rather than squandering time on a confession of judgment complaint, the creditor might have been better off—and obtained a faster result—had it filed a conventional breach of contract lawsuit.

In the June 2010 issue of the Litigation & Counseling Alert, Kurt M. Carlson, Chair of the Much Shelist Creditors' Rights, Insolvency & Bankruptcy group, wrote that is wise to pause before beginning litigation to be sure you have chosen the right strategy. The same logic applies here. There are times when a confession of judgment is the correct remedy to pursue. In other situations, however, the risk of having a judgment vacated may outweigh the benefits of charging into court. If you are considering a confession of judgment, a discussion with your attorney may help clarify whether it is the right weapon for you.