Charging Order Protection

A charging order is the lien a judgment creditor gets against a debtor’s interest in an LLC. It sends the debtor’s distributions to the creditor and leaves the creditor with no vote, no voice in management and no claim against company assets. How much protection that limit gives depends on the state whose LLC act governs the company.

Ten states bar foreclosure of the charged interest and say in the statute that the bar covers a one-member company. Twenty jurisdictions let a creditor foreclose the interest at any member count. In ten jurisdictions the statute never makes the charging order the only remedy. Two owners with identical companies and identical judgments can end up in opposite positions, because their legislatures wrote different statutes.

State-by-State Charging Order Protection Chart

Every entry below is what a creditor in that state may do beyond collecting distributions: ask a court for another remedy, foreclose the charged interest, or take a sole member’s whole interest.

Current as of September 2026. Download the charging order protection chart (PDF).

State	Exclusive Remedy	Foreclosure of the Interest	Single-Member LLC	Authority
Alabama	Yes	Barred	Statute silent	Ala. Code § 10A-5A-5.03(f)
Alaska	Yes	Barred	Covered expressly	Alaska Stat. § 10.50.380(c), (e)
Arizona	Yes	Statute silent	Statute silent	Ariz. Rev. Stat. § 29-3503(A), (E)
Arkansas	Yes, for a multi-member LLC only	Permitted on a showing of bad faith; against a sole member on a reasonable-time showing	Excluded (purchaser takes the entire interest and becomes the member)	Ark. Code § 4-38-503(b), (c), (d)(2)
California	Yes, with the court’s other orders	Permitted on a showing	Statute silent	Cal. Corp. Code § 17705.03(b), (f)
Colorado	No exclusivity language	Permitted, no condition stated	Statute silent	Colo. Rev. Stat. § 7-80-703
Connecticut	Yes	Barred	Covered expressly	Conn. Gen. Stat. § 34-259b(e)
Delaware	Yes	Barred	Covered expressly	Del. Code tit. 6, § 18-703(d), (e)
District of Columbia	Yes, with the court’s other orders	Permitted on a showing	Excluded (purchaser takes the entire interest and becomes the member)	D.C. Code § 29-805.03(b), (c), (f), (h)
Florida	Yes, except against a sole member	Barred for a multi-member LLC; permitted against a sole member on a showing	Weaker on a showing (purchaser takes the entire interest and becomes the member)	Fla. Stat. § 605.0503(3)-(6)
Georgia	Expressly not exclusive	Barred, unless the operating agreement provides otherwise	Statute silent	Ga. Code § 14-11-504(a), (b)
Hawaii	Yes	Permitted at any time	Statute silent	Haw. Rev. Stat. § 428-504(b), (e)
Idaho	Yes	Permitted on a showing	Excluded (purchaser takes the entire interest and becomes the member)	Idaho Code § 30-25-503(c), (f), (h)
Illinois	Yes	Permitted at any time	Statute silent	805 ILCS 180/30-20(c), (g)
Indiana	No exclusivity language	Statute silent	Statute silent	Ind. Code § 23-18-6-7
Iowa	Yes	Permitted on a showing	Excluded (purchaser takes the entire interest and becomes the member)	Iowa Code § 489.503(3), (6), (8)
Kansas	Yes	Barred	Covered expressly	Kan. Stat. § 17-76,113(d), (e)
Kentucky	Yes	Permitted at any time	Statute silent	Ky. Rev. Stat. § 275.260(1), (4)
Louisiana	No exclusivity language	Statute silent	Statute silent	La. Rev. Stat. § 12:1331
Maine	Yes	Barred	Statute silent	Me. Rev. Stat. tit. 31, § 1573(3), (7)
Maryland	Yes	Permitted on a showing	Statute silent	Md. Code, Corps. & Ass’ns § 4A-607(c), (f)
Massachusetts	No exclusivity language	Statute silent	Statute silent	Mass. Gen. Laws ch. 156C, § 40
Michigan	Yes	Barred	Statute silent	Mich. Comp. Laws § 450.4507(5), (6)
Minnesota	Yes, with the court’s other orders	Permitted on a showing	Statute silent	Minn. Stat. § 322C.0503, subds. 2, 3, 6
Mississippi	Yes	Statute silent	Statute silent	Miss. Code § 79-29-705(3), (4)
Missouri	No exclusivity language	Statute silent	Statute silent	Mo. Rev. Stat. § 347.119
Montana	Yes	Permitted at any time	Statute silent	Mont. Code § 35-8-705(3), (5)
Nebraska	Yes	Permitted on a showing	Statute silent	Neb. Rev. Stat. § 21-142(c), (g)
Nevada	Yes	Barred	Covered expressly	Nev. Rev. Stat. § 86.401(2)(a)
New Hampshire	Yes, except against a sole member	Barred for a multi-member LLC; execution sale against a sole member on a showing	Weaker on a showing (purchaser takes all membership rights and becomes the member)	N.H. Rev. Stat. § 304-C:126(IV)-(VII)
New Jersey	Yes	Barred	Statute silent	N.J. Stat. § 42:2C-43
New Mexico	No exclusivity language	Statute silent	Statute silent	N.M. Stat. § 53-19-35
New York	No exclusivity language	Statute silent	Statute silent	N.Y. Ltd. Liab. Co. Law § 607(a), (b)
North Carolina	Yes	Statute silent	Statute silent	N.C. Gen. Stat. § 57D-5-03(a), (d)
North Dakota	Yes	Barred	Covered expressly	N.D. Cent. Code § 10-32.1-45(6), (7)
Ohio	Yes	Barred	Statute silent	Ohio Rev. Code § 1706.342(F)
Oklahoma	Yes	Barred	Covered expressly	Okla. Stat. tit. 18, § 2034
Oregon	No exclusivity language	Statute silent	Statute silent	Or. Rev. Stat. § 63.259
Pennsylvania	Yes	Permitted on a showing	Excluded (purchaser takes the entire interest and becomes the member)	15 Pa. Cons. Stat. § 8853(c), (f), (h)
Rhode Island	No exclusivity language	Statute silent	Statute silent	R.I. Gen. Laws § 7-16-37
South Carolina	Yes	Permitted at any time	Statute silent	S.C. Code § 33-44-504(b), (e)
South Dakota	Yes	Barred	Covered expressly	S.D. Codified Laws § 47-34A-504(e), (g)
Tennessee	Yes	Statute silent	Statute silent	Tenn. Code § 48-249-509
Texas	Yes	Barred	Covered expressly	Tex. Bus. Orgs. Code § 101.112(c), (d), (g)
Utah	Yes	Permitted on a showing	Excluded (purchaser takes the entire interest and becomes the member)	Utah Code § 48-3a-503(3), (6), (8)
Vermont	Yes	Permitted on a showing	Excluded (purchaser takes the entire interest and becomes the member)	Vt. Stat. tit. 11, § 4074(c), (g), (h)
Virginia	Yes	Statute silent	Statute silent	Va. Code § 13.1-1041.1(D), (E)
Washington	Yes, with the court’s other orders	Permitted at any time	Statute silent	Wash. Rev. Code § 25.15.256(1), (2), (5)
West Virginia	Yes, with the court’s other orders	Permitted at any time	Statute silent	W. Va. Code § 31B-5-504(a), (b), (e)
Wisconsin	Yes, with the court’s other orders	Permitted on a showing	Excluded (purchaser takes the entire interest and becomes the member)	Wis. Stat. § 183.0503(2), (3), (6), (8)
Wyoming	Yes	Barred	Covered expressly	Wyo. Stat. § 17-29-503(g)

How a Charging Order Works

A judgment creditor applies to the court for a charging order against the debtor-member’s transferable interest in the LLC. If the court grants the order, it creates a lien on distributions. Any money the LLC would have paid to the debtor-member gets redirected to the creditor instead.

The creditor holding a charging order receives only the economic rights of a transferee. A transferee has no voting power, no management authority, no access to the LLC’s books, and no ability to compel distributions. The non-debtor members and the LLC manager retain full control over the company’s operations, including whether and when to distribute profits.

The protection works because the creditor cannot force money out of the LLC while the manager can keep earnings inside the company for legitimate business purposes. A creditor who waits for distributions that never come often settles for far less than the full judgment amount.

When two creditors pursue the same member’s LLC interest, the first to obtain a charging order from a court takes priority over one who merely holds a recorded judgment lien. The Florida First District Court of Appeal applied that rule in Capstone Bank v. Perry-Clifton Enterprises, LLC, 230 So. 3d 970 (Fla. 1st DCA 2017). A former spouse recorded an Alabama divorce judgment against her ex-husband’s membership interest but never asked a court for a charging order, and a bank that applied later came ahead of her.

The charging order exists to protect an LLC’s other members rather than its debtor. It keeps them from sharing governance with someone they did not choose, or from accepting another member’s creditor as a co-manager. Courts that read the remedy in light of that purpose have narrowed it where the debtor is the only member and no one else’s interest is affected.

Exclusive Remedy and the Foreclosure Bar

Two separate sentences in an LLC act decide how strong a charging order is. One makes the charging order the exclusive remedy, so a creditor cannot ask a court for anything else. The other bars foreclosure of the charged interest, so a creditor cannot have the interest sold to satisfy the judgment.

A statute can carry the first sentence without the second. Eleven jurisdictions make the charging order exclusive and still let a court foreclose the charged interest on a showing. Minnesota and Nebraska require proof that “distributions under a charging order will not pay the judgment debt within a reasonable time,” and Maryland measures the same gate against the amount the creditor is owed. Seven other states let a court order that sale at any time, with no showing at all.

In nine states the statute says nothing about exclusivity, which leaves a creditor free to argue for other remedies: Colorado, Indiana, Louisiana, Massachusetts, Missouri, New Mexico, New York, Oregon and Rhode Island. Georgia goes further. Section 14-11-504(b) of its code says the charging order “shall not be deemed exclusive of others which may exist,” and it names garnishment served on the company as an alternative.

A third sentence appears in a smaller group of acts, and it bars the creditor from reaching the company’s own property. Alabama, Delaware, Kansas, Maine, Mississippi, North Dakota, Ohio, Texas, Virginia and Wyoming each carry that bar. New York carries it while saying nothing about exclusivity, so a New York creditor cannot levy on company assets and is not confined to the charging order either.

Which States Have the Strongest Charging Order Statutes?

Alaska, Connecticut, Delaware, Kansas, Nevada, North Dakota, Oklahoma, South Dakota, Texas and Wyoming have the strongest statutes in the country. Each of them shuts off foreclosure of the charged interest, and each names the one-member company, so a creditor there waits for distributions the manager decides whether to pay.

Wyoming’s section 17-29-503(g) names the sole member, bars foreclosure of the interest, and shuts a creditor out of the company’s assets. The same subsection bars a court order for directions, accounts and inquiries, so a Wyoming creditor cannot turn the charging order into a discovery tool. No Wyoming state court has construed the subsection.

Delaware’s 6 Del. C. § 18-703(d) bars attachment, garnishment and foreclosure “whether the limited liability company has 1 member or more than 1 member,” and subsection (e) keeps every creditor away from company property. Nevada’s LLC statute reaches the same result and adds that “no other remedy may be ordered by a court.” The Nevada Supreme Court has held that a charging order there takes only the member’s economic share. Kansas does the whole job in one sentence, barring attachment, garnishment and foreclosure at either member count.

Texas bars foreclosure of the charging order lien, and a 2023 amendment added a subsection applying the section to single-member and multi-member companies alike. Alaska, North Dakota, Oklahoma and South Dakota all say in their own words that the section covers a company with one member, and each of them bars foreclosure in the same breath.

Five more states bar foreclosure and say nothing about member count: Alabama, Maine, Michigan, New Jersey and Ohio. Their acts carry no clause covering a one-member company, so what a sole member gets there rests on the absence of a carve-out rather than on anything a legislature wrote. Michigan and Ohio go on to bar a court order requiring the company to account or answer inquiries.

Arizona, Mississippi, North Carolina, Tennessee and Virginia make the charging order exclusive and carry no foreclosure provision at all. A creditor there has no statutory route to a sale and no statutory bar to argue against, so a court would have to settle the question.

Which States Let a Creditor Foreclose on an LLC Interest?

Twenty jurisdictions let a court foreclose the charged interest at any member count. Twelve of them draw no line between one member and several: California, Colorado, Hawaii, Illinois, Kentucky, Maryland, Minnesota, Montana, Nebraska, South Carolina, Washington and West Virginia. The other eight treat a sole member worse still.

Most of the twenty make the creditor prove first that the distributions will fall short of the judgment inside a reasonable period. The exceptions are Hawaii, Illinois, Kentucky, Montana, South Carolina, Washington and West Virginia, where a court can order the sale as soon as the order issues. Colorado’s statute names no condition either.

California calls the charging order the exclusive remedy and then lets a court foreclose it on that showing. The same section allows a receiver over the distributions, with power to make the inquiries the debtor could have made. A California appeals court held in Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc. (Cal. Ct. App., Feb. 4, 2021, No. B305910) that appointing a receiver is an abuse of discretion where no evidence shows the debtor frustrated collection.

A foreclosure sale does not always hand the creditor the company. In most of these states the purchaser takes a transferee’s rights and does not become a member, so the buyer holds a claim on distributions the manager still controls. That limit falls away where the debtor is the only member. In Arkansas a court may also order the sale of a multi-member interest, where the other members starve distributions in bad faith.

Does a Single-Member LLC Get Charging Order Protection?

In ten states a single-member LLC gets what a multi-member LLC gets, because the statute says so in terms. In nine states and the District of Columbia the sole member is singled out for worse treatment. Everywhere else the act says nothing about member count, and a court would decide.

The landmark case is Olmstead v. FTC, 44 So. 3d 76 (Fla. 2010). The Florida Supreme Court held that Florida’s charging order statute did not stop a court from ordering the owner of a single-member LLC to surrender the entire membership interest. Its reasoning was textual. A sole member can freely transfer the whole interest, and nothing in the LLC act made the charging order exclusive or abolished the older creditor remedy of levy and sale.

A federal bankruptcy court reached a similar conclusion in In re Ashley Albright, 291 B.R. 538 (Bankr. D. Colo. 2003). A bankruptcy trustee could exercise all rights of a sole member, including management and liquidation rights, because the debtor’s entire LLC interest was property of the estate.

Florida answered in 2011 by amending its LLC statute, a change a Florida appellate court later called the Olmstead patch. The amendment added the exclusive-remedy language the old statute had lacked, and it created a foreclosure remedy against a single-member LLC where distributions will not satisfy the judgment within a reasonable time. Both rules now sit in section 605.0503, and a buyer at that foreclosure sale acquires the entire membership rather than a transferee’s rights.

Arkansas, Idaho, Iowa, Pennsylvania, Utah, Vermont, Wisconsin and the District of Columbia share one rule. On foreclosure against a sole member the buyer acquires the whole membership and steps in as the member, and the debtor drops out of the company. New Hampshire reaches the same place through an execution sale, once the creditor shows the judgment will not be satisfied inside a reasonable period.

The cure for a single-member LLC is another member, and an irrevocable trust usually fills that role, because bringing in a second individual creates complications of its own. A second member helps in the states that draw the one-member line. It gains nothing where a creditor can foreclose at any member count, and nothing where the statute already covers the sole member by name. The second member also needs a real economic interest, and a token one percent stake a court might disregard does not solve the problem.

Does the Formation State’s Law Control?

Formation does not settle the charging order question. Courts have divided over where a membership interest sits once a creditor enforces a charging order. An owner who forms in Wyoming, Delaware or Nevada for asset protection may still meet a court that applies the law of the forum instead.

The internal affairs doctrine provides that an LLC’s home state law governs its internal matters, and courts disagree about whether a creditor’s charging order is such a matter. A Florida resident sued in Florida over assets held in a Wyoming LLC may have that question decided either way.

A court can apply the law of the state with the most substantial relationship to the dispute instead. A Connecticut court applied its own charging order statute without any choice-of-law analysis in Rockstone Capital, LLC v. Marketing Horizons, Ltd., 2013 WL 4046597 (Conn. Super. Ct. July 17, 2013). The judgment debtor objected that the LLC was a foreign entity, and the court charged his interest in the company anyway.

The risk is highest where the LLC is a passive holding entity managed entirely from a state with weaker protection. The more substance the company has in its formation state, meaning real operations, a physical office and assets held there, the better its chances that a court applies that state’s law. An LLC formed in Wyoming but run entirely from California is unlikely to receive Wyoming’s protection in a California court.

What Bankruptcy Does to Charging Order Protection

Charging order protection is a creation of state law, and federal bankruptcy law can displace it. Whether it does turns on how many members the LLC has, on what the trustee can demand, and on whether the debtor moved the interest to defeat creditors.

When a debtor files for bankruptcy, 11 U.S.C. § 541 sweeps all property interests into the bankruptcy estate, including LLC membership interests. What the trustee can do with that interest depends on whether anyone else is a member. A sole member’s whole interest passes to the trustee, who then holds the power to manage the company and liquidate what it owns. If other members exist and withhold consent, the estate collects only the debtor’s share of profits and distributions.

The Albright court reached the sole-member result under a Colorado statute that conditioned a transferee’s management rights on the consent of other members. Its footnote 9 says a single non-consenting member, however small her stake, would have changed the outcome. Colorado has since rewritten that section.

A charging order is also a tool a trustee can use. The Tenth Circuit Bankruptcy Appellate Panel held in Pettine v. Lofstedt, No. 23-013 (10th Cir. BAP Nov. 15, 2023), that a Chapter 7 trustee was entitled to a Wyoming charging order against the debtor’s interest in a multi-member Wyoming LLC.

Section 544(a)(1) gave the trustee the rights a hypothetical judicial-lien creditor would have held, and the panel approved the sale of that charging order. Wyoming’s statute bars foreclosure and every other remedy, and it still did not keep the debtor’s right to distributions out of his own bankruptcy case.

In Albright, footnote 9 also warned that a token second member is no shelter. A debtor who brings in a peppercorn co-member to defeat creditors still faces the avoidance provisions, and the opinion names 11 U.S.C. §§ 544(b)(1) and 548(a). Section 548(e) reaches back ten years. It applies only to a transfer the debtor made to a self-settled trust or similar device of which the debtor is a beneficiary. It also requires actual intent to hinder, delay, or defraud a creditor.

Anyone whose finances make bankruptcy realistic has to plan around this. A state charging order statute binds judgment creditors collecting through state court, and it does not control what a trustee may do with the interest once the case is filed.

The Phantom Income Problem

A creditor holding a charging order against an LLC interest may owe federal taxes on income it never receives. Revenue Ruling 77-137 requires an assignee who has taken substantially all dominion and control over a partnership interest to report the distributive share even in a year with no cash distribution. A charging order gives its holder a lien and no control at all. Whether the ruling reaches a creditor in that position is unsettled; no court has decided the question.

Practitioners call income that is taxed but never received phantom income. The creditor’s tax bill grows while the cash stays inside the LLC, and the longer the manager withholds distributions, the worse the creditor’s economics get.

Not every charging order triggers phantom income. The tax treatment depends on the LLC’s operating agreement, how income is allocated among members, and whether the charging order constitutes an assignment for tax purposes. The possibility is concrete enough that sophisticated creditors weigh it before seeking a charging order. For the member being collected against, it is one more reason a creditor may prefer to settle.

How to Strengthen Charging Order Protection

Charging order protection is not automatic. Its strength depends on how the LLC is structured, where it is formed, and what the operating agreement says.

Use a multi-member structure. A single-member LLC is the weak case in the ten jurisdictions that draw the one-member line, and in each of them the creditor who forecloses ends up owning the company. Adding a second member removes the rationale courts use to expand creditor remedies. The addition works only where that member has real money at stake.

Draft the operating agreement for protection. The operating agreement should give the manager sole discretion over distributions and restrict transfers of membership interests. It should require unanimous consent before any new member is admitted. A creditor holding a charging order receives only a transferee’s rights, and the operating agreement defines how limited those rights are.

Choose the formation state deliberately. An LLC formed in Nevada gets a statute that bars foreclosure at either member count, and Wyoming, Texas, Delaware, Alaska, Kansas, North Dakota, Oklahoma, South Dakota and Connecticut all write the same protection in their own terms. A court applies the formation state’s law only where the company has a genuine connection to that state, so an entity formed in Wyoming and operated from California may get California’s rules instead.

Keep the company separate in fact. A creditor who cannot reach the LLC through a charging order may try to reach it by arguing the company and the member are the same. Florida preserves that route expressly, leaving alter ego and constructive trust available alongside the charging order. Courts weighing such a claim look at whether the LLC kept its own bank accounts, was funded well enough to do business, and was treated as distinct from its owner.

The Connecticut Appellate Court held two LLCs liable for their owner’s personal judgment in Litchfield Asset Management Corp. v. Howell, 799 A.2d 298 (Conn. App. Ct. 2002). The owner treated company funds as her own and took no distributions a creditor could charge.

Pair the LLC with an offshore trust for higher-value assets. Charging order protection, even at its strongest, is a domestic remedy inside the U.S. legal system, and a judgment creditor with enough resources can wait out a domestic standoff. Assets held by an offshore asset protection trust sit outside the reach of a U.S. court. For someone with substantial exposure, a domestic LLC under an offshore trust reaches further than any state charging order statute on its own.