Effective Equity Stripping Through Friendly Liens
Friendly liens are a fantastic way to protect the equity in your real estate or other business assets. We can provide equity stripping for both real estate assets through the use of a Mortgage or Deed of Trust and business assets through the use of a UCC-1 filing.
Many times, potential creditors will run checks on your assets to see how much equity is available. If they see that you own real estate with lots of available equity, then the assets can become a target for the creditor. It can be something they want. The same can be said for business assets. If a potential creditor sees lots of equity in equipment, inventory or other business assets, they may decide to go after those assets.
A good solid equity stripping program can remove these assets from prying eyes. The assets will give the appearance of no value due to the kind and nature of the liens and therefore the potential creditor will move on to greener pastures someplace else.
THE MAGIC OF MAKING IT HAPPEN
There are many equity stripping programs on the Internet. The problem is most of them make no economic sense. And in far too many cases, a third party whom you do not know is the one controlling the lien on your assets.
An equity stripping lien works best when it is set up in such a way as there is a business purpose behind it. If you can go before a judge and tell him what you did and why and have it make economic sense, then you are in a good place. Far too often people will say that there is a lien on their assets but they have no idea why it is there. Frequently there is no consideration for the lien. Someone, somewhere just puts a lien on the assets. Not good!
However, there is a better way. By using our capitalization notes, our liens make total economic sense. As long as you make payments on your notes you are good to go.
Since the entity placing the lien is ultimately owned by you or has a pass through taxation that points to you, then there are no tax issues. In essence, you are paying yourself so it is a dollar deduction on one end and a dollar income on another.
Normally, an entity is formed for the specific purpose of placing the lien. All different kinds of entities could be used for this. We normally like to form an entity in a state that does not publish the names of the managers or owners and allows us to have some degree of freedom in the words available for the name. It helps if the entity that is placing the lien has a name that is associated with lending and has no easy availability of Internet access as to who the owners and managers might be.
YOU HAVE TO WORK IT
In order for an equity stripping lien to work, it is vital that the lien by properly honored. That means any payments that need to be made must be made on a regular basis. Even though the payments may be made to an entity owned or controlled by you, those payments still must be made and they must be made consistently.
The basic idea is that if you do not honor your own structure, then you cannot expect a judge to honor it. In those cases, where our clients have properly utilized the structured and made the payments, then it has proven to be a powerful and effective asset protection tool.
DOCUMENTS NEEDED FOR A FRIENDLY LIEN
In order to place the lien, we will need to form an entity that will be capitalized by you with a note. As collateral for that note the entity will place liens on various assets in the form of a mortgage, deed of trust or UCC-1 filing.
It will be necessary for you to provide us with copies of your deeds, and/or a list of business assets so that we can properly prepare the documents. The finished documents will include a security agreement, note, operating agreement, minutes, share certificates and many other documents that will allow you to sleep easy knowing that your assets are protected.
The liens are then filed with the appropriate government agency to make sure that there is the proper public record of the asset lien.