This strategy calls for you to borrow against or otherwise pledge your assets as collateral security for some obligation. The secured creditor then has first claim against the asset to the extent of the loan. If the loan approximates the value of the asset, there is little or no equity exposed to a litigant. These loans can be structured in a number of ways. It's possible to fully encumber everything you own through one or more loans, and this is a common defensive technique.
Too many attorneys overlook the equity stripping strategy when they attempt to shelter their clients' assets. But equity stripping combined with titling assets to protective entities can be just the combination needed to stop even the most determined creditor. Part of the problem is that lawyers may see equity stripping as a financial – not legal – solution. A more common problem is that few attorneys – or clients – know how to structure liens that are both defensible and workable from the client's perspective.
Encumbering your assets reduces the equity your creditor can seize. You
may have multiple investments but your equity in those investments is
minimal due to liens, or mortgages. You can do this with all assets which
are not protected, such as second homes, collectibles, vehicles, etc.
You can lien your assets separately or give a blanket lien to one creditor.
Similarly, you can equity strip the assets in your business or professional
practice. The goal is to leave no asset unencumbered and exposed.
Equity stripping can be a great additional firewall above and beyond titling
your assets to protective entities or converting them into exempt assts.
Again, the goal is to strip the equity from everything you own so that
your assets are valueless to a plaintiff. You can accomplish this with
many different types of liens. A lien is a mortgage or security interest
filed against a debtor's real estate or personal property. For real
estate, as the owner of a piece of property, you own the property, but
you transfer the economic value of your property to the mortgage holder.
This reduces your equity in the property and the equity your creditor
or litigant can seize. You may place multiple liens against one property.
The priority of each lien is then determined by their priority of filing
in the public records.
When you have valid liens, a claimant can only seize the equity you have
in the property. For protection, you want little or no equity exposed.
Your $300,000 home with a $300,000 mortgage is worth nothing to a litigant.
Different terminology applies to personal property. A lien on personal
property is a security agreement. You may also pledge personal property
to secure your debt. The personal property may then remain in the possession
of the secured party (i.e. pledged jewelry to a pawn shop). More typically,
the debtor continues to possess the collateral. The secured party only
files a notice of lien (a financing statement) in a public recording office
to give third parties notice that the property is encumbered.
Debt-shielding your business is just as important as protecting your personal
assets. Encumber your business assets with a friendly lender. Should an
unsecured creditor try to collect against your business, the friendly
creditor can foreclose and re-sell you your own business assets. You can
even act as your own lender, and supply capital to your business. It's
important to note that any lien must be valid, and you must be able to
prove that you actually owe the money. Don’t invest or lend money
to your business without first consulting with an Attorney.
For additional information about equity stripping your assets, contact
The Presser Law Firm, P.A. for a complimentary preliminary consultation.
The Presser Law Firm P.A.
6199 N. Federal Highway, Boca Raton FL 33487
(800) 999-9992 or e-mail info@assetprotectionattorneys.com
