How does equity stripping work?

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.