Equity Reduction Plan
I received an email inquiry about whether "equity reduction plans" are an effective asset protection technique. The mail described these plans as a version of equity stripping . In the equity reduction plan someone puts a friendly mortgage or lien on the debtor's property but no money actually changes hand. I inferred that the tool is supposed to place a priority lien on the property to a friendly creditor without having to actually find or obtain enough cash to fund a lien large enough to cover most of the property equity.
I never heard of an equity reduction plan. I don't think the plan as described will protect property because the mortgage/lien is essentially bogus. The conveyance of a lien or mortgage could be attacked as a fraudulent conveyance of an interest in property without actual consideration. . A relatively unknown Florida statute, Section 726.201 pertains to fraudulent loans that may apply to the equity reduction plan.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
Dear Mr. Alper
Your assertion that the referenced equity reduction plan is negated by the fact that the friendly lien is bogus seems on point however, there remains an interesting aside.
Provided the lien remained uncontested for a time period long enough to survive the statute of limitations on fraudulent transfers, basically 4 years and one more after discovery or after it could have been discovered, would not any assertion/claim that the lien was bogus and should be set aside be barred by the same statute of limitations, essentially allowing the lien to stand regardless of it's original validity?
I am not an attorney, but I would like to ask a question. I recently was exposed to a an actual fraudulent deed attempt on a bankruptcy court in Arizona. It was clear fraud. The debtor with intent quick claimed the deed to her mother, clear intent. Now if one puts a friendly lien on his own real property making him second in line to the lender, and there is no lawsuits or bankruptcy pending, the intent is clear that it is asset protection, where is the intent to defraud ? Or are you saying that the law views asset protection as an attempt to defraud. A FLP owns the real property, I put a friendly lien on the property is it still subject to a "charging order" or "foreclose" by a plaintiff. So if that method is fraud why would it not be fraud to do same protection using a off shore, or Delaware trust, it too is asset protection.