Exclusivity Of Charging Order Remedy

Topic Exclusive_Remedy TopicsExclusivity

The phrase "exclusive remedy" as found in § 503(h) has caused considerable confusion. This is largely because the term "remedy" is a statutory term-of-art that normally refers to a list of enumerated remedies in a particular state's judgment enforcement laws, but is misinterpreted to mean something like "exclusive outcome" — which isn't the same thing.

A problem is that what constitutes a "remedy" varies from state to state, and there are other avenues of a creditor to obtain relief (such as reverse veil piercing or fraudulent transfer actions) that may or may not considered to be a "remedy". Thus, there may avenues of relief that are desired for creditors to access, but which may be off-limits because of the phrase, and there may be avenues of relief that are undesirable for creditors to access that are available to creditors because they are not technically "remedies".

Thus, it is suggested that consideration be given to using some other phrase than "exclusive remedy" in the text of § 503(h).