2026 Opinions

20XX Site.Year2026ChargingOrderOpinions

2026 Charging Order Opinions

Burkhalter v. SMS Financial P, LLC, 2026 WL 1870939 (Ga.App., June 29, 2026).

♦ The Court of Appeals of Georgia affirmed a superior court order charging a judgment debtor’s 50 percent ownership interest in a Georgia limited liability company, Burkhalter Rentals, LLC, to satisfy an unpaid personal judgment. The judgment debtor, Harry Burkhalter, and his wife formed the LLC while residing in Florida and argued that Florida law should apply because membership interests are personal property determined by the owner's domicile. Under Florida law, they claimed to hold their interest as tenants by the entirety, meaning each owned 100 percent of the entity, which would insulate the asset from a unilateral creditor. The judgment creditor, SMS Financial P, LLC, sought the charging order under Georgia law, which does not recognize tenancy by the entirety. The appellate court rejected Burkhalter's argument and applied the "internal affairs" choice-of-law doctrine rather than the traditional rule for personal property. The court reasoned that the nature and allocation of membership ownership interests directly impact the inter se rights and duties of the members, particularly regarding how the LLC calculates and executes pro rata distributions. Furthermore, the court noted that the LLC’s own operating agreement undermined Burkhalter's tenancy by the entirety claim by explicitly stating that upon a member's death, the interest would pass via a will or Georgia intestacy law rather than automatically vesting in the surviving spouse. Consequently, because the LLC was a Georgia entity governed by Georgia law for its internal affairs, the court held that Burkhalter and his wife owned the company as tenants in common, leaving his 50 percent interest subject to the charging order. ♦

GF Judgments LLC v. Estate of Friedman, 2026 IL App (1st) 250546 (Ill.App.Distr. 1, June 26, 2026).

♦ The Appellate Court of Illinois affirmed a circuit court order granting a charging order in favor of a judgment creditor, GF Judgments LLC (GFJ), against the distributional interests of the Evelyn and Lindy Funding Trusts in three third-party citation respondent LLCs. GFJ sought the charging order to satisfy a domesticated $3.6 million New York judgment originally entered against the deceased debtor, Evgeny Freidman, whose estate was the named defendant. As a threshold matter, the court held that GFJ had forfeited its argument challenging the LLCs' standing by failing to raise it below, but determined that the LLCs nonetheless possessed limited standing as third-party citation respondents to contest whether the statutory predicates of a charging order were met. On the merits, the court held that the circuit court did not abuse its discretion by applying nonmutual offensive collateral estoppel to a prior New York bankruptcy court ruling, which had fully litigated and determined that the trusts were Freidman's alter egos and that their assets were reachable by his creditors. The court rejected the LLCs' contention that the current proceeding exceeded the summary scope of Illinois citation proceedings under 735 ILCS 5/2-1402, explaining that the circuit court did not adjudicate a new, fact-intensive corporate veil-piercing claim but rather properly gave preclusive effect to an existing out-of-state adjudication to identify debtor assets. Finally, the court concluded that the LLCs' contractual defense—that any interest attributable to Freidman terminated upon his death pursuant to the operating agreements—raised an ownership dispute that could not be conclusively resolved within the summary confines of a supplementary proceeding and must instead be pursued in a separate plenary action. ♦

Beaumier v. Raley (In re Beaumier), 2026 WL 1072965 (Bk.N.D.W.Va., April 20, 2026).

♦ The bankruptcy court considered whether a creditor’s prepetition filing of an application for a charging order—without the subsequent entry of an order or any postpetition affirmative action—violates the automatic stay or the discharge injunction,, and whether the creditor has an affirmative duty to withdraw the application.BackgroundPrepetition, Kathi Raley (Defendant) obtained a default judgment against Donald and Arielle Beaumier (Plaintiffs) and filed an application for a charging order in West Virginia state court to intercept oil and gas lease proceeds owed to the Plaintiffs by Antero Resources. No charging order was ever entered, but Antero independently placed the lease proceeds in suspense upon receiving notice of the application. The Plaintiffs subsequently filed Chapter 7, received a discharge, and moved for summary judgment, claiming Raley's failure to withdraw the application violated both the automatic stay and discharge injunction.Holding & RationaleThe U.S. Bankruptcy Court for the Northern District of West Virginia denied the Plaintiffs’ motion and granted summary judgment sua sponte for the Defendant.No Automatic Stay Violation: A charging order application merely requests judicial relief and lacks operative legal effect or lien perfection until actually entered by a court. The automatic stay halts pending proceedings but does not require creditors to affirmatively undo or withdraw prepetition pleadings. Antero’s retention of the funds was an independent business choice, not an exercise of control by the Defendant.No Discharge Injunction Violation: Because the application created no active legal restraint or postpetition enforcement mechanism, Raley's inaction did not constitute an intentional act to collect a discharged debt. ♦

Universal Life Ins. Co. v. Lindberg, 2026 WL 1407705 (2026).

♦ The North Carolina Court of Appeals affirmed a trial court order granting Universal Life Insurance Company a charging order against Greg Lindberg’s economic interest in Global Growth Holdings, LLC, a Delaware entity converted from a corporation to an LLC. Lindberg argued that North Carolina’s LLC Act does not authorize charging orders against foreign LLCs and that the court lacked in rem or quasi in rem jurisdiction over his out-of-state interest. The court first held the order was immediately appealable because, unlike an earlier charging order in related litigation, it did not contemplate further proceedings and functioned as a final ancillary order enforcing a prior judgment. On the merits, the court interpreted the Act’s definitions of “limited liability company” and “economic interest” to include both domestic and foreign LLCs, concluding that a judgment creditor may charge a debtor’s economic interest in either. It also rejected Lindberg’s argument about “distributions,” reasoning that the statute’s definition is broad enough to cover transfers for the benefit of an interest owner. Finally, the court held that personal jurisdiction over Lindberg was sufficient because a charging order reaches only the debtor’s personal property interest, not the foreign LLC itself; by making a general appearance without contesting personal jurisdiction, Lindberg submitted to the court’s authority. The charging order was therefore valid, and the order was affirmed. ♦

Shumener, Odson Oh LLP v. Saadia Square, LLC, 2026 WL 1266002 (S.D.N.Y., May 8, 2026).

♦ The United States District Court for the Southern District of New York granted a motion by judgment creditor Shumener to require judgment debtor Saadia Square to turn over its membership interest in SM Logistics Holdco LLC directly to Shumener to satisfy an outstanding judgment of 785,346.97 dollars. Presiding Judge Jennifer L. Rochon analyzed the motion under Federal Rule of Civil Procedure 69(a) and New York Civil Practice Law and Rules Sections 5225(a) and 5240. The court found that turnover is mandatory under Section 5225(a) once it is shown that the judgment debtor possesses personal property in which they have an interest, a fact conceded by the defendant in this case. Although the plaintiff did not explicitly establish personal jurisdiction, the court deemed the issue waived since the defendant appeared and failed to contest it. Saadia Square argued that turnover was inequitable because its membership interest supposedly dwarfed the value of the judgment, potentially allowing the plaintiff a windfall. The court rejected this, noting the defendant could have sold the interest itself to satisfy the debt. Furthermore, the court dismissed claims that transfer would violate SM Holdcos operating agreement or a separate loan agreement with a Blackstone affiliate, ruling that private contracts cannot insulate debtors from legal enforcement of judgments. While the court was not persuaded that the defendant had actively obstructed collection efforts, it exercised its broad discretion under CPLR 5240 to order a direct turnover to the plaintiff rather than a sheriff sale. The court observed that intangible assets like LLC interests are often ill-suited for public auctions. Since the judgment remained unpaid for six months and the assets value was uncertain, direct turnover was deemed the most appropriate enforcement mechanism. Ultimately, the court ordered Saadia Square to transfer its entire interest in SM Holdco to the plaintiff within seven days. ♦

Vaughn v. Farhat, 2026 WL 1073680 (Vir.App., April 21, 2026).

♦ Robert L. Vaughn, Jr. sought to enforce a $6.35 million judgment (including treble and punitive damages) against Isam Farhat arising from alleged fraud and contract-related misconduct in a residential construction project. After obtaining the judgment, Vaughn applied under Virginia Code § 13.1-1041.1 for charging orders against Farhat’s transferable interests in several LLCs (including two single-member LLCs) and asked the circuit court to foreclose those LLC interests via sheriff’s sale. The circuit court entered charging orders imposing liens and directing Farhat to pay over any distributions or other consideration from his LLC interests, but it refused foreclosure. On appeal, the Court of Appeals affirmed, holding that the statute’s plain language makes a charging order the creditor’s exclusive remedy against a member’s transferable interest and limits the creditor to the right to receive distributions the debtor would otherwise receive; allowing foreclosure would add a remedy the General Assembly omitted when it amended the statute in 2006 to remove prior foreclosure language. The court acknowledged policy concerns about asset shielding in single-member LLCs but concluded it could not rewrite the statute, and any additional collection avenues must come from other provisions of Virginia law rather than foreclosure under a charging order. ♦

Matter of Canada, 2026 WL 376475 (5th Cir., Feb. 11, 2026).

♦ The United States Court of Appeals for the Fifth Circuit is considering whether an ownership interest in a Texas limited liability company (LLC) is exempt property in a federal bankruptcy proceeding, focusing on the interpretation of Texas law. William R. Canada Jr., who declared bankruptcy, claimed his 70% interest in DAD Drilling, LLC was exempt, but both the bankruptcy and district courts denied the exemption, citing the absence of explicit protection in Texas statutes and prior Texas court decisions. The appellate court notes that while Texas intermediate courts have generally held LLC interests are non-exempt, the language of Texas Business Organizations Code § 101.112 could be interpreted as providing an exclusive remedy for creditors, potentially suggesting a stronger exemption. Because the Texas Supreme Court has not directly addressed this issue and the question is both close and recurring, the Fifth Circuit has certified the question to the Texas Supreme Court, asking whether LLC membership interests are exempt property in bankruptcy under § 101.112. The court emphasizes the importance of resolving this ambiguity due to the prevalence of LLCs in Texas and the interplay between state and federal exemption laws. ♦

Radiance Capital Receivables Twelve LLC v. Campbell (In re Campbell), 2026 WL 84544 (Bk.S.D.N.Y., Jan. 12, 2026).

♦ The United States Bankruptcy Court for the Southern District of New York addressed cross-motions for summary judgment in an adversary proceeding concerning the dischargeability of debts. Radiance Capital, holding a judgment against Debtor John Campbell, had previously obtained Charging Orders in Alabama requiring Campbell’s limited liability companies (LLCs) to pay distributions directly to Radiance. Instead, Campbell diverted funds from his LLCs, specifically Whigham Place, to himself and other controlled entities for personal use. Radiance sought to have the debt declared nondischargeable. The Court granted summary judgment in favor of the Debtor on Count I, dismissing the claim for "actual fraud" under 11 U.S.C. § 523(a)(2)(A). Relying on Eleventh Circuit precedent, the Court held that the underlying debt was a standard loan breach not obtained by fraud, and the subsequent fraudulent transfers did not create a new, separate fraud debt. However, the Court ruled in favor of Radiance on Count II under § 523(a)(6). It found that Campbell’s knowing violations of the Charging Orders constituted "willful and malicious injury." Therefore, any monetary sanctions arising from these violations are nondischargeable. The Court sua sponte modified the automatic stay to permit the Alabama District Court to adjudicate the pending contempt motion and determine the specific sanction amount. Finally, regarding Count III, the Court issued a declaratory judgment that the liens created by the Charging Orders remain valid and survive the bankruptcy discharge. The Court rejected Campbell’s defenses regarding superior IRS liens and waiver, noting his failure to appeal the original orders or report transfers. ♦

TBG Funding LLC v. Kenwood Commons, LLC, 2026 WL 504166 (Feb. 12, 2026).

♦ The New York Supreme Court (Albany County) addressed whether a judgment creditor may obtain turnover of a judgment debtor’s LLC membership interests despite “pick your partner” transfer restrictions in operating agreements. Following a foreclosure deficiency judgment of approximately $17.9 million, the plaintiff sought turnover of the defendants’ interests in two LLCs—Winter Investors, LLC and Tunnel Associates, LLC—or, alternatively, charging orders. The court held that LLC membership interests are personal property subject to enforcement under CPLR article 52 and that charging orders under LLC Law § 607 are discretionary, not exclusive remedies. It concluded that judgment debtors have standing to invoke operating agreement provisions but that those provisions do not bar turnover where CPLR § 5225 authorizes it. Turnover was deemed appropriate for Winter because the judgment debtors owned 100% of that entity, eliminating concerns about non-debtor members. As to Tunnel, which had an unaffiliated co-owner, the court found no requirement that non-debtor members affirmatively consent to turnover, particularly where they did not intervene after notice. Accordingly, the court ordered turnover of the specified LLC membership interests to the plaintiff’s designee to satisfy the judgment in whole or in part. ♦