Can a lender incur liability due to a debtor’s back taxes?

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Can a lender incur liability due to a debtor’s back taxes?

One of my relatives has a business. She was assessed a $50,000 back tax bill for 2008. I’m thinking of borrowing the money against some property I own and loan it to her. If her business fails, can my property be dragged into any settlements?

Asked on August 23, 2010 under Business Law, Texas

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

It depends on how you lend her the money.  If you are refinancing the property, taking out cash and lending it to her then no, the property is not subject to being attached.  If the business was taking out a loan and using the property as collateral then yes, the property would be subject to some form of action should the business fail.  Then the loan would be "secured" with other property.  What you need to do is to make sure that you are protected if the business does fail.  You need to do this as a formal loan with rights that would give you priority in a bankruptcy should she decide to file same.  Speak with an attorney about this all. Good luck.


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