Question about a chat with my accountant that changed my view on cross-collateralization

My accountant, who's seen a lot of deals go bad, told me over coffee last week, 'You don't own that asset until the last loan secured by it is paid, and I've seen people lose their house over a defaulted equipment loan they forgot was tied to it,' which made me realize I'd never fully read the security agreements on my commercial line.

3 comments

3 Comments

simonh7424d ago

My uncle lost his fishing cabin over a truck loan from fifteen years prior. The bank had quietly tied them together when he refinanced. What gets me is how these clauses can hide in plain sight, even in loans you've paid off for years. Your accountant is right, it's not really yours until every single paper trail is clear. I started making a simple spreadsheet listing every asset and every loan number, then had my lawyer check for links. Found two I didn't know about. It's the old, paid off stuff that'll sneak up on you.

christopher_wells414d ago

Honestly, that fear is overblown if you just keep good records. Banks want repeat business, so they aren't out to trick you with hidden clauses. Tbh, most people get into trouble because they don't read their own mail, not because of some secret plot.

andrew_gonzalez8824d ago

That spreadsheet idea from @simonh74 is smart. I need to do the same and then get a pro to check it, because you just can't trust your own memory with this stuff.