Debt & Asset Protection

Debt can be a great asset protection tool. Anyone with a lot of debts are less attractive to creditors. If you appear dead broke, you are less likely to have a lawsuit against you. If a real estate property is worth $1 million dollars and you have $950,000 debt on it, no one will want to collect on that house. But if you own a real estate property free and clear it is attractive for collectors.

Having alot of debt is great asset protection

There fore debt can offer some asset protection. Having a lot of debt is actually one of the best asset protections strategies. That is not to say you should accumulate as much debt as possible. But, a high debt level does make going after your assets less attractive.

How can high debt level help protect my assets?

Well first of all, the person filing a lawsuit against you will need to pay an attorney to sue you. The attorney can either charge on a contingency fee basis or charge by the house with a retainer fee. If you are a wealthy person, the attorney would not mind taking chances and be paid on a contingency fee basis.

However if after a public records search, the attorney cannot find some assets you own, then the attorney will most likely insist on a large retainer fee and charge by the hour. That means, the person suing you will have to come up with a large chunk of cash upfront which makes him or her less likely to go through with the lawsuit. Most people cannot afford litigation attorneys by the hour so they will drop the case.