What Is A Charging Order?

by Bruce Givner on October 19, 2011

Assume a creditor gets a judgment against you, and your valuable asset is a membership interest in a limited liability company.  What does the creditor do to satisfy his judgment?  The creditor must go to court and ask the judge for a charging order.  The charging order means that your membership interest in the LLC is charged with the payment of the creditor’s judgment.  Of course, you and your family, or your friends, are probably in control of the LLC.  Therefore, if a creditor is successful in getting a judge to issue a charging order, you will use your influence to reduce or eliminate any distributions from the LLC.  In other words, the creditor will have a difficult time getting his judgment satisfied with distributions from the LLC and the charging order will be unsuccessful.

Under California law, and under the laws of 13 other states, a creditor can – if the charging order is unsatisfied – ask the court to allow a foreclosure of your membership interest.  In theory that sounds pretty frightening.  However, the foreclosure is of your membership interest; it isn’t of the LLC’s assets.  And in California the foreclosure is – at least to my knowledge – almost never used, and never satisfactory to the creditor.  So most asset protection lawyers ignore foreclosure as a risk. www.GivnerKaye.com (310) 207-8008


{ 7 comments… read them below or add one }

John October 20, 2011 at 2:58 pm

This is the best blawg i have ever seen. Thanks for publicing this usefull information. I will come back in a few days to see if you have posted some new articles.


Janae October 27, 2011 at 1:31 pm

What a joy to find such clear thnkiing. Thanks for posting!


Scout October 27, 2011 at 6:08 pm

This piece was a lifejacket that saved me from drowning.


Bubba October 29, 2011 at 8:11 pm

How could any of this be better stated? It couldn’t.


admin October 30, 2011 at 12:15 pm

Thank you. Did you have any questions?


Stanton Rockford November 1, 2011 at 5:17 pm

hello there and thank you for your information – I have certainly picked up anything new from right here. I did however expertise some technical issues using this website, as I experienced to reload the website many times previous to I could get it to load correctly. I had been wondering if your web hosting is OK? Not that I’m complaining, but sluggish loading instances times will often affect your placement in google and can damage your high quality score if ads and marketing with Adwords. Well I’m adding this RSS to my email and could look out for much more of your respective interesting content. Make sure you update this again soon..


dubai liability company formation November 8, 2011 at 5:46 pm

Hello my loved one! I wish to say that this post is awesome, nice written and include approximately all vital infos. I would like to see more posts like this .


Leave a Comment

Previous post:

Next post: