Main Street Business #614 How Lawsuits Can Take Away Your Home (And How to Stop It!)
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Mar 20, 2026 They unpack how rising home equity can become your biggest legal risk. State homestead rules and tenancy-by-the-entirety protections get compared. Tactics like equity stripping, HELOC liens, and domestic asset protection trusts are explained. They warn about sham transfers, limits of umbrella policies, and why gifting to kids can backfire.
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Homestead Exemption Is Your First Line Of Defense
- Most states have a homestead exemption that automatically protects a set amount of home equity from creditors.
- Example: Arizona protects $400,000 of equity so a $1M house with $700K mortgage is fully shielded from creditors.
File A Homestead Declaration If Your State Requires It
- Check whether your state requires you to file a homestead declaration and record it on county records.
- Example: Massachusetts and Texas offer large or unlimited exemptions but you must file a declaration to claim it in some cases.
Strip Equity And Put Proceeds Into Protected Accounts
- Use equity stripping to place legitimate liens (HELOC or second mortgage) so creditors see debt against the property and can't reach excess equity.
- Then deploy withdrawn funds into protected vehicles like retirement accounts, not a brokerage or bank savings.