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Simple English definitions for legal terms
cushion
Read a random definition: civil penalty
A quick definition of cushion:
A cushion is something that helps soften a blow or makes something more comfortable. In law, equity means fairness and doing what is right. It is a set of rules that help judges make fair decisions when the law doesn't cover everything. It can also mean the difference between what something is worth and what is owed on it, or a share in a company.A more thorough explanation:
Cushion refers to the amount by which the value of a property exceeds secured claims or liens. It is the difference between the value of the property and all encumbrances upon it. For example, if a house is worth $500,000 and has a mortgage of $300,000, the cushion or equity in the house is $200,000.
Cushion can also refer to an ownership interest in a property or business. For instance, if someone has equity in a business, it means they have a share in the company.
- John has a house worth $400,000 and a mortgage of $200,000. The cushion or equity in his house is $200,000.
- Sara invested $50,000 in a startup and was given 10% equity in the company.
The examples illustrate how cushion or equity represents the value of a property or business that is not encumbered by any debts or liabilities. It is the amount that an owner would receive if they sold the property or business and paid off any outstanding debts or obligations.