Charging Order? - Posted by Wayne-NC

Posted by William Bronchick on April 26, 2004 at 09:13:51:

Sec 57C-5-03 limits the creditor’s remedy to a charging order.

“On application to a court of competent jurisdiction by
any judgment creditor of a member, the court may charge the
membership interest of the member with payment of the
unsatisfied amount of the judgment with interest. To the extent
so charged, the judgment creditor has only the rights of an
assignee of the membership interest.”

Yes, I read music, too, but I mainly play by ear.

Charging Order? - Posted by Wayne-NC

Posted by Wayne-NC on April 22, 2004 at 21:07:50:

What does this really mean from the LLC law? “Rights of judgment creditor”.
On application to a court of competent jurisdiction by
any judgment creditor of a member, the court may charge the
membership interest of the member with payment of the
unsatisfied amount of the judgment with interest. To the extent
so charged, the judgment creditor has only the rights of an
assignee of the membership interest. This Chapter does not
deprive any member of the benefit of any exemption laws
applicable to his membership interest. Does this really mean that a percentage of ownership is assigned and not just the income from that percent of ownership? Please clarify.

Re: Charging Order? - Posted by William Bronchick

Posted by William Bronchick on April 25, 2004 at 09:46:32:

It basically means the creditor gets an assignment of distributions of income the member was formerly getting. The creditor does not get voting rights. If a creditor attached the interest of the debtor’s stock in a corporation, the creditor would have all the rights of the stockholder, including voting out the board (assuming he had a majority interest).

LLCs and limited partnerships have this built-in “asset protection” feature - your entire ownership interest cannot be taken by a creditor, just the “economic rights”.

Re: Charging Order? - Posted by Hank FL

Posted by Hank FL on April 26, 2004 at 08:32:16:

I mentioned something about a charging order on the main board and randy(OH)posted these links.

I know you’re busy, but these links are interesting:

http://www.riserlaw.com/publications/ap/credtax.htm

http://www.nvinc.com/updatechargingorder.htm

Re: Charging Order? - Posted by Wayne-NC

Posted by Wayne-NC on April 25, 2004 at 15:29:49:

Thanks for that great explaination of the charging order. However, I guess what I am really asking is the real meaning of this “legalize” that I copied directly from the North Carolina Limited Liability Company Act Chapter 57C. I scaned the whole act and nowhere in it does it mention “charging order”. How did this term come to be? Do other states specifically state it? The only section refering to the rights of a creditor is listed in 57C-5-03. Would that be the wording of a charging order? Can you read into this. Secondly, great guitar. Can you read music too? (I really enjoyed your seminar in Atl.)

Re: Charging Order? - Posted by William Bronchick

Posted by William Bronchick on April 26, 2004 at 08:58:33:

As for the first article, I’ve said in my presentations that the tax
liability on a creditor is a theory that was never challenged since
the 1977 IRS ruling. It really wouldn’t happen, since no creditor’s
attorney is dumb enough to risk getting sued for malpractice for
being wrong.

As for the second article, which discusses a creditor’s remedy in
foreclosing an LLC or partnership interest, that is also an
extremely rare event, and there are only a few reported cases of
it. Foreclosing the interest of an LLC member yields the same
result to the person who buys it - he has economic interests only,
not voting rights. So, the person who buys the interest at auction
is in no better shape than the creditor would have been.