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  1. #1
    Join Date
    Apr 2012
    Posts
    29

    Default Will a Home Mortgage or Equity Loan Protect Your Home from Creditors

    My question involves business law in the state of: New York

    Hello - I run a business, and while I feel that my risk for a lawsuit is low - there is still risk of one.

    I was told that if I owe any money on my home (even a home equity loan payment) - that someone who is sueing me can not go after my home - since I guess a bank has an interest in it.

    Is this true? Or does this vary state by state? I am in NY, and may be in the position shortly where I will be able to pay off my home loan.

    I am wondering if I should pay it off, then immediately get a home equity loan for a few thousand.

  2. #2
    Join Date
    Oct 2006
    Posts
    16,185

    Default Re: Home Ownership vs Law Suits - Home Equity Loan As Buffer

    No, its not true. What varies by state to state is whether or not a sale of the home can be forced. In most states the answer to that is no. A lien can be placed against the home which means that when/if the house is sold the creditor gets their money first (after any mortgage indebtedness) but a creditor generally cannot force the sale of the home.

  3. #3
    Join Date
    Nov 2013
    Posts
    6,887

    Default Re: Home Ownership vs Law Suits - Home Equity Loan As Buffer

    That is not completely correct. A creditor that sues and receives a judgment can force the sale of the property to satisfy the lien through a sheriffs sale.

    The issue of having a lien by a bank makes no difference. The bank will get their money and the creditor will get theirs. What is left over goes to the debtor. It really depends on the creditor as to whether or not they want to wait or not for the property to be sold.

  4. #4
    Join Date
    Sep 2010
    Posts
    19,667

    Default Re: Home Ownership vs Law Suits - Home Equity Loan As Buffer

    Well, limiting our discussion to New York, yes the lienholder can foreclose. The question as to whether they will depends on what position they are in. If the house is already encumbered by a mortgage, it could be risky forcing a sale as they may not net anything after the senior liens are paid off (and the taxman is always senior to everybody). The judgment lien is usually there to catch some funds if the property is sold.

    If you've already got a first, there's not much gained by getting a home equity loan. Yes, taking the loan out decreases the equity even further and makes it unlikely they'll foreclose, but they'll come after whatever you put that money you cashed out into.

  5. #5
    Join Date
    Oct 2006
    Posts
    16,185

    Default Re: Will a Home Mortgage or Equity Loan Protect Your Home from Creditors

    If you want to protect yourself against business liabiity, the one sure fire way to do that is to have a good business liability insurance policy. They are generally not overly expensive and it avoids a lot of worry.

  6. #6
    Join Date
    Jul 2018
    Posts
    2,336

    Default Re: Will a Home Mortgage or Equity Loan Protect Your Home from Creditors

    Quote Quoting lordx
    View Post
    I was told that if I owe any money on my home (even a home equity loan payment) - that someone who is sueing me can not go after my home - since I guess a bank has an interest in it.

    Is this true?
    As explained in the other forum where you asked this same question, no (although it obviously depends on exactly what "go after" means).

    Quote Quoting lordx
    View Post
    does this vary state by state?
    Yes.

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