This is called equity stripping and it’s one of the most effective asset protection strategies in real estate.
A UCC-1 is a public filing that shows a creditor has a secured claim against your assets.
When someone searches your name or your properties before deciding to sue, they see exactly how much secured debt is already attached.
Here’s how it works.
My wife opened an LLC and we drafted a personal loan agreement between her LLC and me for $1M.
That loan was then registered as a UCC-1 filing which is now public record. On paper I owe her LLC $1M as a secured creditor.
If anyone sues me their attorney does what every attorney does first.
They pull public records to see if the case is worth pursuing.
What they find is $1M in secured debt that has to be paid before they collect anything.
Secured creditors get paid first. That’s the law. Her LLC is ahead of any plaintiff in line.
Even if they win a judgment there’s nothing left to collect after her claim is satisfied.
No attorney is going to take that case on contingency.
Contingency means the lawyer only gets paid if they win and collect.
If the math shows there’s nothing to collect they don’t take the case.
The lawsuit dies before it starts.
This doesn’t hide assets.
Everything is still in my name and fully visible. It just makes pursuing me financially pointless for anyone looking to sue.
This strategy has to be set up before any legal issues arise.
Filing a UCC-1 after you’ve been sued or after you’re aware of a potential claim can be challenged as a fraudulent transfer.
The timing matters.
Work with a real estate attorney who understands asset protection and UCC filings in your state.
This is not legal advice, just what I use to protect my portfolio.
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Comments (15)
How does it play out if the marriage fails
What happens when you’re seeking funding for a loan for a business and they see that debt?
Except, if someone sees your wife, and then they collect her assets, including the secure debt from you then that secure debt becomes theirs and then you have to pay that.
Interesting strategy
Interesting strategy! Just opened my first LLC back in April’s
Interesting strategy
Interesting strategy
interesting strategy
Interesting strategy
Interesting strategy
Interesting strategy
Interesting strategy
Interesting Strategy
Interesting strategy
Interesting strategy