Legal Question in Real Estate Law in Georgia

Line of Credit exposure

I own a small sub-contracting business that does insulation for residential and commercial construction. We have grown to the point where I need a line of credit to help with cash flow. I am doing more work than my lines of credit with my suppliers will allow and I'm needing material sooner than I'm being paid for completed work. The house my wife and I own is in my wife's name to protect against any suits than can arise in this line of work and I will need to use the equity in that house to provide collateral for the line of credit. The line of credit will be at the same bank the original mortgage was obtained at. I realize if the business were to fail and I defaulted on the line of credit the bank could take the house but if me and/or my company is sued would the fact that the house is being used as collateral on a business loan make it possible for the suing party to come after the house. The line of credit and the mortgage would, of course be current. I'm just wondering about potential exposure of my personal home.

Thanks!

Greg


Asked on 10/20/05, 11:27 am

2 Answers from Attorneys
Scott Riddle Law Office of Scott B. Riddle, LLC

Re: Line of Credit exposure

If the house and the loan are in your wife's name, and you want to maintain that, one option is to have her obtain the line of credit, then loan you the money for the business. You then pay her back, and she pays the loan payments to the bank. You will want to maintain documents for all loans and payments between you two. All bank accounts should be seperate, with no commingling of business and personal funds. If you have not done so, seriously consider a corporate or LLC.

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Answered on 10/20/05, 11:34 am
Glenn M. Lyon, Esq. MacGREGOR LYON, LLC, Business Attorneys

Re: Line of Credit exposure

I echo what Mr. Riddle suggested and strongly recommend forming a separate business entity to protect your personal assets. Regarding your question, the line of credit secured with the house should not allow a potential plaintiff to go after the house itself, only the assets in your or the company's name.

If you would like to discuss any issues further, please feel free to contact my office. My contact information is below. Thank you.

The foregoing is general information only, not specific legal advice. No attorney/client relation has been created or should be implied.

Glenn M. Lyon, Esq

MacGregor Lyon, LLC

Promenade II

1230 Peachtree Street NE

Suite 1900

Atlanta Georgia 30309

Phone 404.942.3545

Fax 404.795.0993

[email protected]

www.MacGregorLyon.com

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Answered on 10/20/05, 2:23 pm


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