Adkisson's
CHARGING ORDERS
The Creditor's Remedy Against A Debtor's Interest In An LLC Or Partnership
Kentucky Charging Order
GENERAL PARTNERSHIPS
Ky.Stat. § 362.285. Partner's interest subject to charging order
(1) This section provides the exclusive remedy by which the judgment creditor of a partner or the transferee of a partner may satisfy a judgment out of the judgment debtor's transferable interest.
(2) On application to a court of competent jurisdiction by a judgment creditor of a partner or a partner's transferee, a court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment. To the extent so charged, the judgment creditor has only the rights of a transferee and shall have no right to participate in the management of or to cause the dissolution of the partnership. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the partnership and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or which the circumstances of the case may require to give effect to the charging order.
(3) A charging order constitutes a lien on and the right to receive distributions made with respect to the judgment debtor's transferable interest in the partnership.
(4) The court may order a foreclosure of the interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee. A chargingorder does not of itself constitute an assignment of the transferable interest.
(5) At any time before foreclosure, an interest charged may be redeemed:
(a) By the judgment debtor;
(b) With property other than partnership property, by one (1) or more of the other partners; or
(c) With partnership property, by one (1) or more of the other partners with the consent of all of the partners whose interests are not so charged.
(6) This section does not deprive a partner of a right under exemption laws with respect to the partner's interest in the partnership.
(7) The partnership is not a necessary party to an application for a charging order. Service of the charging order on a partnership may be made by the court granting the charging order or as the court may otherwise direct.
(8) This section shall not apply to the enforcement of a judgment by a partnership against a partner of that partnership.
(9) This section shall apply to the issuance of a charging order against the interest of a partner or assignee of a partner of a foreign partnership.
Ky.Stat. § 362.1-504. Partner's transferable interest subject to charging order
(1) This section provides the exclusive remedy by which the judgment creditor of a partner or the transferee of a partner may satisfy a judgment out of the judgment debtor's transferable interest.
(2) On application to a court of competent jurisdiction by a judgment creditor of a partner or a partner's transferee, a court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment. To the extent so charged, the judgment creditor has only the rights of a transferee and shall have no right to participate in the management of or to cause the dissolution of the partnership. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the partnership and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or which the circumstances of the case may require to give effect to the charging order.
(3) A charging order constitutes a lien on and the right to receive distributions made with respect to the judgment debtor's transferable interest in the partnership.
(4) The court may order a foreclosure of the interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee. A chargingorder does not of itself constitute an assignment of the transferable interest.
(5) At any time before foreclosure, an interest charged may be redeemed:
(a) By the judgment debtor;
(b) With property other than partnership property, by one (1) or more of the other partners; or
(c) With partnership property, by one (1) or more of the other partners with the consent of all of the partners whose interests are not so charged.
(6) This subchapter does not deprive a partner or a partner's transferee of a right under exemption laws with respect to the partner's or transferee's interest in the partnership.
(7) The partnership is not a necessary party to an application for a charging order. Service of the charging order on a partnership may be made by the court granting the charging order or as the court may otherwise direct.
(8) This section shall not apply to the enforcement of a judgment by a partnership against a partner of that partnership.
(9) This section shall apply to the issuance of a charging order against the interest of a partner or transferee of a partner of a foreign partnership.
LIMITED PARTNERSHIPS
Ky.Stat. § 362.2-703. Partner's transferable interest subject to charging order
(1) This section provides the exclusive remedy by which the judgment creditor of a partner or the transferee of a partner may satisfy a judgment out of the judgment debtor's transferable interest.
(2) On application to a court of competent jurisdiction by any judgment creditor of a partner or a partner's transferee, the court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment. To the extent so charged, the judgment creditor has only the rights of a transferee, and shall have no right to participate in the management or to cause the dissolution of the partnership. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the partnership and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or which the circumstances of the case may require to give effect to the charging order.
(3) A charging order constitutes a lien on and the right to receive distributions made with respect to the judgment debtor's transferable interest. A charging order does not of itself constitute an assignment of the transferable interest.
(4) The court may order a foreclosure upon the transferable interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee.
(5) At any time before foreclosure, an interest charged may be redeemed:
(a) By the judgment debtor;
(b) With property other than limited partnership property, by one (1) or more of the other partners; or
(c) With limited partnership property, by the limited partnership with the consent of all partners whose interests are not so charged.
(6) This subchapter does not deprive any partner or a partner's transferee of the benefit of any exemption laws applicable to the partner's or transferee's transferable interest.
(7) The partnership is not a necessary party to an application for a charging order. Service of the charging order on a partnership may be made by the court granting the charging order or as the court may otherwise direct.
(8) This section shall not apply to the enforcement of a judgment by a limited partnership against a partner of that partnership.
(9) This section shall apply to the issuance of a charging order against the interest of a partner or transferee of a partner of a foreign partnership.
LIMITED LIABILITY COMPANIES
Ky.Stat. § 275.260. Member's transferable interest subject to charging order
(1) This section provides the exclusive remedy by which the judgment creditor of a member or the assignee of a member may satisfy a judgment out of the judgment debtor's limited liability company interest.
(2) On application to a court of competent jurisdiction by a judgment creditor of a member or a member's assignee, a court may charge the judgment debtor's interest in the limited liability company with payment of the unsatisfied amount of the judgment. To the extent so charged, the judgment creditor has only the rights of an assignee and shall have no right to participate in the management or to cause the dissolution of the limited liability company. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the limited liability company interest and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or which the circumstances of the case may require to give effect to the charging order.
(3) A charging order constitutes a lien on and the right to receive distributions made with respect to the judgment debtor's limited liability company interest. A charging orderdoes not of itself constitute an assignment of the limited liability company interest.
(4) The court may order a foreclosure upon the limited liability company interest subject to the charging order at any time. The purchaser of the limited liability company interest at the foreclosure sale has the rights of an assignee. At any time before foreclosure, the charged limited liability company interest may be redeemed:
(a) By the judgment debtor;
(b) With property other than limited liability company property, by one (1) or more of the other members; and
(c) With limited liability company property, by the limited liability company with the consent of all members whose interest are not so charged.
(5) This section does not deprive a member or a member's assignee of the benefit of any exemption laws applicable to the member's or assignee's limited liability company interest.
(6) The limited liability company is not a necessary party to an application for a chargingorder. Service of the charging order on a limited liability company may be made by the court granting the charging order or as the court should otherwise direct.
(7) This section does not apply to the enforcement of a judgment by a limited liability company against a member of that company.
(8) This section does apply to the issuance of a charging order against the interest of a member or assignee of a member of a foreign limited liability company.
LIMITED COOPERATIVE ASSOCIATION
Ky.Stat. § 272A.6-050. Charging order
(1) This section provides the exclusive remedy by which the judgment creditor of a member or the assignee of a member may satisfy a judgment out of the judgment debtor's limited financial rights in a limited cooperative association.
(2) On application to a court of competent jurisdiction by a judgment creditor of a member or a member's assignee, a court may charge the judgment debtor's financial rights in the association with payment of the unsatisfied amount of the judgment. To the extent so charged, the judgment creditor has only the rights of a transferee and shall have no right to participate in the management or to cause the dissolution of the association. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the financial rights and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or which the circumstances of the case may require to give effect to the charging order.
(3) A charging order constitutes a lien on and the right to receive distributions made with respect to the judgment debtor's financial rights. A charging order does not of itself constitute an assignment of the financial rights.
(4) The court may order a foreclosure upon the financial rights subject to the charging order at any time. The purchaser of the financial rights at the foreclosure sale has the rights of a transferee. At any time before foreclosure, the charged financial rights may be redeemed:
(a) By the judgment debtor;
(b) With property other than property of the association, by one (1) or more of the other members; and
(c) With association property, by the association with the consent of all members whose financial rights are not so charged.
(5) This section does not deprive a member or a member's assignee of the benefit of any exemption laws applicable to the member's or assignee's financial rights.
(6) The association is not a necessary part to an application for a charging order. Service of the charging order on an association may be made by the court granting the charging order or as the court should otherwise direct.
(7) This section does not apply to the enforcement of a judgment by a limited cooperative association against a member of that association.
(8) This section shall apply to the issuance of a charging order against the interest of a member or assignee of a member of a foreign limited cooperative association.
STATUTORY TRUSTS
Ky.Stat. § 386A.6-060. Charging order
(1) If a beneficial interest is not freely transferable by a beneficial owner so that the transferee has all rights of the transferor, this section provides the exclusive remedy by which the judgment creditor of a beneficial owner or a transferee of a beneficial owner may satisfy a judgment out of the judgment debtor's beneficial interest.
(2) On application to a court of competent jurisdiction by a judgment creditor of a beneficial owner or a beneficial owner's transferee, a court may charge the judgment debtor's beneficial interest with payment of the unsatisfied amount of the judgment. To the extent so charged, the judgment creditor shall have no right to participate in the management or to cause the dissolution of the statutory trust. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the beneficial interest and make all other orders, directions, accounts, and inquiries the judgment creditor might have made or which the circumstances of the case may require to give effect to the charging order.
(3) A charging order constitutes a lien on and the right to receive distributions made with respect to the judgment debtor's beneficial interest. A charging order does not of itself constitute an assignment of the beneficial interest.
(4) The court may order a foreclosure upon the beneficial interest subject to the chargingorder at any time. The purchaser of the beneficial interest at the foreclosure sale shall have no right to participate in the management or to cause the dissolution of the statutory trust. Upon foreclosure the beneficial owner shall be dissociated from and cease to be a beneficial owner of the trust. At any time before foreclosure, the charged beneficial interest may be redeemed:
(a) By the judgment debtor;
(b) With property other than statutory trust property, by one (1) or more of the other beneficial owners; and
(c) With statutory trust property, by the statutory trust with the consent of the trustees.
(5) This section does not deprive a beneficial owner or a beneficial owner's transferee of the benefit of any exemption laws applicable to the beneficial interest.
(6) The statutory trust is not a necessary party to an application for a charging order. Service of the charging order on a statutory trust may be made by the court granting the charging order or as the court should otherwise direct.
(7) This section shall not apply to the enforcement of a judgment by a statutory trust against a beneficial owner of that trust.
(8) This section shall apply to the issuance of a charging order against the beneficial interest of a beneficial owner or assignee of a beneficial owner of a foreign statutory trust.
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More Articles On Charging Orders click here
LAW REVIEW ARTICLES
by Jay Adkisson
For more on the historical background of Charging Orders and contemporary issues involving the same, see Jay Adkisson's article, Charging Orders: The Peculiar Mechanism, 61 South Dakota Law Review 440 (2016). Available at SSRN: https://ssrn.com/abstract=2928487
WEBSITE CONTENTS
General Information
- About Jay Adkisson and this website
- Articles About Charging Orders
Analysis of Uniform Limited Liability Company Act Sections re Charging Orders
- Charging Orders (Section 503) contains the general charging order provisions.
- Foreclosure of Charging Order Liens (503(c-e)) deals with foreclosure generally of an interest subject to a charging order lien.
- Foreclosure re Single-Member LLC (503(f)) is the special case of foreclosure of an LLC with only one member.
- Transfers of Transferable Interests (Section 502) includes definitions of "transfer" (102(23)), "transferable interests" (102(24)), and "transferees" (102(25)) defines to what the charging order attaches.
- Definition of Distribution (Section 102(4)) specifies the economic right obtained through a charging order lien and/or foreclosure.
The Uniform Acts re Charging Orders and Transferable Interests (without Jay's comments):
- Uniform Limited Liability Company Act, Article V ("ULLCA" and "RULLCA").
- Uniform Partnership Act, Article V - ("UPA" and "RUPA")
- Uniform Limited Partnership Act, Article VII - ("ULPA" and "RULPA")
Effect of Bankruptcy On The Debtor-Member's LLC Interest here
Collected Court Opinions On Charging Orders here and below
Charging Order Example Sample Form
TOPICAL RESEARCH
NATURE OF REMEDY
Distributions/Economic Rights - Creditors rights to distributional interests/economic rights
PREJUDGMENT
Prejudgment Relief - Freezing the interest and distributions pending judgment
MOTION MECHANICS
Entities - The types of legal entities amenable to charging orders, or not
Procedure - The procedure for obtaining a charging order and ancillary provisions
Unknown Interest - Where the debtor's interest, if any, has not been ascertained
Order Form Generally - Most issues to the form of the charging order
Order Form Future Interests - How the charging order affects subsequently-acquired interests
Exemptions - Available state and federal protections that may apply to charging orders
INTERSTATE
Abstention - Collateral attacks on charging orders in federal court
Conflicts-Of-Law - Determining which state's laws apply to a charging order dispute
Jurisdiction - Issues relating to the court's authority over out-of-state debtors and LLCs
Foreign Entities - Charging orders against out-of-state entities
CREDITOR RESTRICTIONS
Creditor Rights Restrictions - Limitations on creditors' management and informational rights
Information Rights - Creditors' ability to access information about the LLC
Management & Voting Rights - Rights of creditor after charging order issued
LIEN EFFECT AND PRIORITY
Lien - The lien effect of a charging order and priority issues
COMPLIANCE
Compliance - Issues for the LLC and non-debtor members in complying with a charging order
Receiver - The role of the receiver in charging order proceedings
SINGLE MEMBER LLC
Single-Member LLCs - Enforcing the judgment against an LLC with a sole member
FORECLOSURE
Foreclosure - Liquidation by judicial sale of the debtor's right to distributions
REPURCHASE AND REDEMPTION RIGHTS
Repurchase/Redemption Rights - Third-parties' ability to purchase the charged interest
APPEAL
Appeal - Issues relating to the appeal of a charging order
RELATION TO OTHER REMEDIES
Exclusivity - The charging order as the sole remedy available to creditors and exceptions
Voidable Transactions/Fraudulent Transfers - Issues relating to avoidable transfers of interests
SUNDRY OTHER
Abstention - Attempts to collaterally attack the charging order in federal court
Bankruptcy - Treatment of the debtor/member's interest in bankruptcy
Intra-Member Disputes - Where one member obtains a charging order against another
Taxes - Tax issues relating to charging orders for all involved parties
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List Of Court Opinion Sections
Additional Court Opinions About charging orders (unsorted)
THE CHARGING ORDERS PRACTICE GUIDE
The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association, click here for more
Available for purchase directly from the ABA at https://goo.gl/faZzY6
Also available from Amazon at https://www.amazon.com/Charging-Orders-Practice-Guide-Understanding/dp/1641052643
OTHER INFORMATIONAL WEBSITES
by Jay Adkisson
- Jay Adkisson - More about Jay D. Adkisson, background, books, articles, speaking appearances.
- Creditor-Debtor Law - An overview of judgment enforcement tools and their uses by creditors, and possible defenses by debtors. Related topics include:
- Voidable Transactions - Discussion of the Uniform Voidable Transactions Act (a/k/a 2014 Revision of the Uniform Fraudulent Transfers Act) and fraudulent transfer law in general.
- California Enforcement of Judgments Law - Considers the topic of judgment enforcement in California, including the California Enforcement of Judgments Law and other laws related to California creditor-debtor issues.
- Private Retirement Plans - An exploration of a unique creditor exemption allowed under California law which can be very beneficial but is often misused.
- Protected Series - An examination of the single most complex statutory legal structure yet created, with particular reference to the Uniform Protected Series Act of 2017.
- Asset Protection - The all-time best-selling book on asset protection planning by Jay Adkisson and Chris Riser.
- Anti-SLAPP Laws - A collection of and commentary about Anti-SLAPP laws and significant court decisions on the subject within the United States, and special focus on the California Anti-SLAPP law.
- Captive Insurance - Licensed insurance companies formed by the parent organization to handle the insurance and risk management needs of the business.
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© 2021 Jay D. Adkisson. All Rights Reserved. No claim to government works or the works of the Uniform Law Commission. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction. This site is https://chargingorder.com Contact: jay [at] jayad.com or by phone to 702-953-9617 or by fax to 877-698-0678.