Quit Setting Your Money On Fire

What You Need to Know About Using a Home as Collateral for a Bail Bond

by Kathryn Watson

A bail bondsman will bail you or a loved one out of jail at a fraction of the actual cost (usually around 10 percent of the bail bond amount). However, if the bail amount required by the court is high or there's some question of whether the defendant will actually show up to court as required, the bail company may ask you to put up collateral to back the bond. Typically, you can use your home as collateral, but there are a few things you should know about the process before you execute this option.

Only the Equity Can Be Used

One thing people don't realize about using a home as collateral is they can only guarantee a bond up to the amount of the equity in the property. Even though the market value of your home is $200,000, you can only use it to guarantee a $100,000 bond if that's all the equity you have in the property, for example.

This is because the bail company will put a lien on your home for the value of the bond, and it would prefer to do so in an amount it's likely to collect. If you have a mortgage, your lender is the primary creditor and must be paid first if the home is sold, which means there may not be enough money left over to pay the entire lien amount if it exceeds the amount of equity in the house. In this case, the bail bond company may be forced to settle for less than they're owed. Therefore, most companies will only accept the equity as collateral.

You Must Add the Bail Company to the Deed

In addition to the lien, the bail company will require you to add the company as a beneficiary on the deed to the home or provide it with a trust deed as part of the lien process. This gives the company the right to foreclose on the home in the event the defendant doesn't show up to court and you don't follow through on repaying the bond.

Be aware that trust deeds are public, so anyone who goes searching for information on your home will know about the lien. If you try to sell your home while the lien is in effect, the title company whose job it is to research any legal encumbrances the house may have (among other things) will certainly uncover it. Although it is possible to sell a home with a lien attached and transfer responsibility for it to the new owners, most potential buyers will shy away from houses with this type of problem, especially if you don't disclose the presence of such a lien upfront.

Therefore, it's important you take this into consideration when deciding whether to help bail someone out of jail and using your home to do so. If you plan on selling in the near future or have any doubts the defendant will show up to court as required, you may want to use a different type of collateral.

You Must Show Proof of Bail Exoneration

Before the bail bond company will release the lien on your home, you may be required to show the bail has been exonerated. When the defendant shows up to all court appointments or the case is dismissed or dropped, the court will remove the bail requirement and refund the money deposited.

If bail was secured by a bond company, the court will usually send them notice of this. However, this doesn't always happen for a myriad of reasons. Therefore, you may need to take it upon yourself to secure the exoneration notice from the court and provide it to the bond company. Once you have done this, be sure to collect a conveyance from the company as proof that it released the lien on your home.

For more information about using a home as collateral for a bail bond, contact a bond company like All Star Bail Bonds.