Spousal Stripping

DEFINITION of 'Spousal Stripping'

An equity-stripping technique used to reduce the equity in a property in order to avoid foreclosure by creditors. Spousal stripping is simply the process of quit-claiming the title of a property to a spouse in order to transfer ownership and protect the asset.

BREAKING DOWN 'Spousal Stripping'

Spousal stripping is one of the most common methods used to strip equity from a property to avoid creditors. The most obvious reason for its popularity is that it is very cost efficient and relatively easy to do. However, spousal stripping is often an ineffective strategy because creditors and attorneys are very knowledgeable of the technique and it can be easily detected. Also, the rise in divorce rates puts the property owner at risk of losing the asset.

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