Adkisson's
CHARGING ORDERS
The Creditor's Remedy Against A Debtor's Interest In An LLC Or Partnership
New Mexico Charging Order
GENERAL PARTNERSHIPS
N.M.S. § 54-1A-504. Partner's transferable interest subject to charging order
(a) On application by a judgment creditor of a partner or of a partner's transferee, a court having jurisdiction may charge the transferable interest of the judgment debtor to satisfy the judgment. 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.
(b) A charging order constitutes a lien on the judgment debtor's transferable interest in the partnership. 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.
(c) At any time before foreclosure, an interest charged may be redeemed:
(1) by the judgment debtor;
(2) with property other than partnership property, by one or more of the other partners; or
(3) with partnership property, by one or more of the other partners with the consent of all of the partners whose interests are not so charged.
(d) The Uniform Partnership Act (1994) does not deprive a partner of a right under exemption laws with respect to the partner's interest in the partnership.
(e) This section provides the exclusive remedy by which a judgment creditor of a partner or partner's transferee may satisfy a judgment out of the judgment debtor's transferable interest in the partnership.
LIMITED PARTNERSHIPS
N.M.S. § 54-2A-703. Rights of creditor of partner or transferee
A. On application to a court of competent jurisdiction by any judgment creditor of a partner or transferee, the court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of a transferee. 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 that the circumstances of the case may require to give effect to the charging order.
B. A charging order constitutes a lien on the judgment debtor's transferable interest. The court may order a foreclosure upon the interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee.
C. At any time before foreclosure, an interest charged may be redeemed:
(1) by the judgment debtor;
(2) with property other than limited partnership property, by one or more of the other partners; or
(3) with limited partnership property, by the limited partnership with the consent of all partners whose interests are not so charged.
D. The Uniform Revised Limited Partnership Act does not deprive any partner or transferee of the benefit of any exemption laws applicable to the partner's or transferee's transferable interest.
E. This section provides the exclusive remedy by which a judgment creditor of a partner or transferee may satisfy a judgment out of the judgment debtor's transferable interest.
LIMITED LIABILITY COMPANIES
N.M.S. § 53-19-35. Rights of judgment creditor of member
On application to a court by any judgment creditor of a member, the court may charge the interest of the member with payment of the unsatisfied amount of the judgment, with interest. To the extent so charged, the judgment creditor has no more rights than those to which an assignee of the member's limited liability company interest would be entitled under the provisions of Section 32 of the Limited Liability Company Act. That act does not deprive any member of the benefit of any exemption laws applicable to his membership interest.
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2020.11.28 ... Uniform Law Commission Creates Drafting Committee To Clean Up And Modernize American LLC Law
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2020.11.23 ... Charging Order Against Interest Of LLC In Bankruptcy Held Not To Violate The Automatic Stay In Nilhan
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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
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
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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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.
Contact Jay Adkisson:
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Phone: 702-953-9617 E:Mail: jay [at] jayad.com
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Admitted to practice law in Arizona, California, Nevada, Oklahoma and Texas.
Jay is a Managing Partner of Adkisson Pitet LLP.
© 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.