A home is often a person's most valuable asset. If you are faced with legal action, an opposing lawyer will often verify your assets to see whether you are vulnerable. Homeowners are vulnerable to the risk of losing their home in a complicated lawsuit in which the opposing side seeks a substantial financial reward. Equity stripping and filing for bankruptcy are key ways a homeowner can protect her residence if sued.
- Skill level:
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Things you need
- Personal identification
- Property deed
- LLC formation court form
- Bankruptcy forms
- Financial records
Consult a real estate and/or bankruptcy attorney. Discuss your matter in detail with each legal representative. Hire an attorney -- or attorneys -- to represent your case in court. Attorneys are experts on state laws regarding home protection, and they can properly counsel you on advantageous legal moves. Give this step serious consideration before moving on to Steps 2 and 3 on your own.
Equity strip your property by forming a limited liability corporation and transferring ownership of the home out of your name to the LCC. Reach out to your state's division of corporations. Ask a representative for LLC formation documentation, and complete the documents in full. LLC forms outline articles of organisation related to the company.
Consult with your attorney and your state version of the Uniform Fraudulent Transfer Act to ensure you are working within the law. Completed properly, transferring home ownership to the LLC "strips" the equity from your person, providing asset protection if you face a lawsuit.
File for Chapter 7 bankruptcy if you meet the criteria. Visit your state division for the U.S. Bankruptcy Court. Tell the administrator your financial situation and ask for forms to file for Chapter 7 bankruptcy. Chapter 7 bankruptcy includes the liquidation of non-exempt personal property to pay creditors. Provide evidence -- for instance, financial records and proof you have owned your home for more than three years -- that bankruptcy is necessary, and submit forms as directed by administrators.
Filing for Chapter 7 bankruptcy will exempt your home and halt the ability of creditors to take possession of it, giving you more leverage to work out payment measures with the courts. Consult your state's homestead exemption statutes to confirm bankruptcy laws and home ownership protection.
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