Charging Orders Against Texas LLCs and Partnerships

No, a judgment creditor cannot take a Texas LLC member’s interest, foreclose on it, or reach the company’s property. Texas law leaves the creditor with a charging order, a lien on the member’s share of whatever the company distributes. The lien cannot be foreclosed. The statute makes the order the creditor’s exclusive remedy, single-member companies included.

The interest itself stays a non-exempt asset. The creditor collects every distribution while the judgment is unpaid, and a court can add a receiver or an injunction alongside the order. Texas courts allow turnover of the interest in four situations. The Supreme Court of Texas has been asked whether the interest is exempt in bankruptcy and, as of September 2026, has not answered.

What a Charging Order Gives a Creditor Under Texas Law

The Texas Business Organizations Code, at section 101.112, lets a member’s judgment creditor ask a court to charge the membership interest with the judgment. After the court charges the interest, the creditor gets only the distributions the member would have received. The order is a lien on the interest, and the statute says the lien may not be foreclosed under the code “or any other law.” The order is also, in the statute’s words, “the exclusive remedy” for satisfying the judgment out of the interest.

The member keeps everything else. Whatever exemption the member could assert in the interest survives the order, and the section bars the creditor from taking possession of the company’s property or pursuing any remedy against that property. A creditor holding the order has no vote, no seat in management, and no power to make the company pay a distribution. The creditor waits for the money the company chooses to pay out and takes the member’s share of it.

Texas gives a limited partner the same treatment. Section 153.256 of the same code, which has not been amended since 2009, applies the same six rules to a partnership interest.

Section 101.112 restricts the creditors of a member and says nothing about the creditors of the company. A judgment against the LLC itself is collected from the LLC’s own assets in the ordinary way. The charging order limit shields only the member’s interest from the member’s own creditors. Texas’s statute both makes the order exclusive and bars foreclosure of the lien, the two features that put a state’s charging-order protection at the strong end.

Does a Single-Member Texas LLC Get Charging Order Protection?

Yes, a Texas LLC with one member has the same charging order protection as a company with many, and since September 1, 2023 the statute has said so in so many words. The 2023 act added one sentence, now subsection (g), saying the section applies to a one-member company and a many-member company alike.

The act described the sentence as a clarification of existing law. The limited-partnership section got no matching sentence. No court, state or federal, has interpreted the subsection since it took effect, so the single-member rule today rests on the statute’s text and on the decisions that came before it.

The leading decision came before the amendment and did not involve a single-member LLC at all. The Houston First Court of Appeals decided Pajooh v. Royal West Investments in 2017. Two judgment debtors owned every interest in a Texas limited partnership, and the creditor asked for a receiver over the entity, arguing that no innocent co-owner needed a charging order’s protection.

The court declined to follow In re Albright and Olmstead, two decisions from other states that let a bankruptcy trustee or a creditor past the charging order where the debtor owned the whole entity. Those courts, it said, were applying statutes unlike the Texas one.

The court held that the statute’s plain text made the charging order the exclusive remedy, that the policy behind the section did not justify departing from that text, and that the same reading governed the LLC section. It then affirmed a receivership over the two debtors themselves, so the creditor could monitor the partnership’s distributions and collect them under the charging order.

In 2022, a year before the amendment, the Fifth Circuit reviewed a charging order against a single-member Texas LLC in Thomas v. Hughes, and no party suggested the section reached that company any differently.

Florida treats a one-member company differently. In Olmstead v. FTC the Florida Supreme Court held in 2010 that the state’s LLC statute, which lacked exclusive-remedy language, did not rule out a levy and sale. A court could therefore order a sole member to surrender the whole interest.

The legislature answered within a year. A member’s creditor in Florida now gets the charging order alone. A multi-member interest cannot be foreclosed, but where the company has one member, the interest can be foreclosed and sold if the creditor proves that the charged distributions cannot pay off the judgment within a reasonable period.

That is why a single-member Florida LLC is weak protection and the usual cure is a second member, most often an irrevocable trust, which puts the interest beyond foreclosure. Florida’s charging-order decisions hold creditors to the lien against a multi-member company and let them foreclose a sole member’s interest. A Texan gains nothing by copying the cure. Texas bars foreclosure at any member count, so a second member adds no protection the statute does not already give a company with one.

Is a Texas LLC Interest Exempt from Creditors?

No, a membership interest in a Texas LLC is not exempt property, yet a judgment creditor cannot take it. Texas courts say the interest is a non-exempt asset and still refuse to order it turned over, because the only route the law gives the creditor is the charging order.

Both statements come out of the turnover statute. Section 31.002 of the Civil Practice and Remedies Code reaches only property the exemption statutes do not cover. A court can order the debtor to hand that property over, or appoint a receiver to take it and sell it.

An LLC interest is property the debtor owns, and no exemption statute covers it, so on its face the turnover statute reaches it. Texas courts of appeals have still refused to order the interest turned over, because section 101.112 confines the creditor to the charging order and forbids foreclosure of the lien.

The Houston Fourteenth Court of Appeals put both halves in one opinion in Klinek v. LuxeYard, decided in 2023. A member’s ownership interest in an LLC, it said, is a non-exempt asset. Turning the member’s interests over to the judgment creditor was still an abuse of discretion, because no charging order was in place, the member had received no distributions, and the statute allowed nothing beyond the order. The court reversed the turnover order as to the LLC interests.

The question reached the Supreme Court of Texas through a bankruptcy case. A Texas debtor who owned 70 percent of an LLC claimed the interest as exempt on the strength of section 101.112. The bankruptcy court and the district court both held the interest was not exempt, and the district court noted that no such exemption appears in the Property Code’s exemption chapter.

The Fifth Circuit’s Matter of Canada opinion, issued February 11, 2026, certified the question to the Supreme Court of Texas. The certified question asks: “Is an LLC membership interest exempt property in a federal bankruptcy proceeding, based on section 101.112 of the Texas Business Organizations Code?”

The panel observed that Texas courts of appeals have repeatedly held the interest non-exempt, and that the statute’s own words may point the other way. An exclusive remedy, it said, reads like a stronger statement of exemption than other exemptions no one contests, and subsection (f) speaks of a creditor without limiting the word. The Fifth Circuit invited the Texas court to answer more broadly than the question’s form if it saw fit.

As of September 11, 2026, the Supreme Court of Texas has not answered. Until it does, the question stays open. The interest may pass to the trustee as property of the estate, or it may stay with the debtor as exempt property. No one can tell a Texan today whether the charging order holds in bankruptcy.

When a Texas Court Can Order the Interest Turned Over

A Texas court can order a member’s LLC interest, or the money it produces, turned over to a judgment creditor in four situations, and the Houston Fourteenth Court of Appeals collected all four in Klinek.

Money the company has already paid out. Once a distribution reaches the member, it is ordinary non-exempt property, and the charging order statute no longer applies to it. In Stanley v. Reef Securities, decided in 2010, the Dallas Court of Appeals held that the code’s charging-order provisions do not bar turnover of distributions already made. Two later Dallas decisions applied the same rule.

A receiver or turnover order that polices an existing charging order. In Pajooh the court affirmed a receivership over the judgment debtors themselves, because they controlled the entities and could get in the way of enforcing the charging orders. The court reversed the order to the extent it reached the partnership’s assets and the interest itself. The receiver’s job is to watch for distributions and see that the creditor gets them. The Fourteenth Court added in 2024 that a charging order is a receiver’s exclusive remedy as well.

A company that operates no business. In Heckert v. Heckert, a 2017 Fort Worth memorandum opinion that Klinek describes, the court found no error in turning over a member’s interest because the company ran no business and no one’s interest would be disrupted. That is the Albright reasoning in its narrowest form. No other court has adopted it, and two have held that it did not apply.

In 2024 the Fourteenth Court declined to decide whether to adopt the Heckert exception; one judge dissented and would have held the order exclusive. The 2023 subsection extends the section to one-member companies, where the reason for an exclusive remedy is weakest.

A judgment creditor that is the company itself, holding a judgment that awards the interest. In Gillet v. Zupt, decided in 2017, the LLC had won a judgment against its own member that awarded the member’s interest to the company. No Texas court had faced the question before. The Fourteenth Court held turnover proper for two reasons. The purpose of an exclusive charging order, keeping an outside creditor from disrupting the business, does not apply when the creditor is the business. And the judgment itself expressly handed the member’s interest to the company.

Both conditions are required. The court reversed that turnover order on unrelated grounds. The Fifth Circuit, predicting how Texas courts would rule, adopted the same two-part rule in Jiao v. Xu, decided in 2022. Its opinion acknowledged that Texas’s highest court had not spoken to how turnover orders and the section fit together. The same opinion holds that a judgment which merely declares what percentage of the company a member owns takes nothing out of the interest, so the section never comes into play.

The Supreme Court of Texas has never interpreted section 101.112. Every rule above comes from a Texas court of appeals or a federal court predicting Texas law, so Texas asset protection case law on charging orders can change the day that court answers the certified question.

What a Creditor Can Get Alongside a Charging Order

A Texas judgment creditor can hold a charging order and an injunction against the debtor at the same time. The Fifth Circuit upheld that pairing in Thomas v. Hughes in 2022.

The debtor there was the sole member of a Texas LLC. A jury had found that she had made a series of fraudulent transfers. After the judgment, the district court charged her membership interest and also ordered that neither she nor the company transfer the company’s real property, its funds, or the interest itself without leave of court. The question was whether section 101.112 left room for that restriction.

The Fifth Circuit held that it did. A court that renders a judgment has inherent power to enforce it, a rule the Supreme Court of Texas has stated for its own courts, and the methods available include charging orders and injunctive relief.

The Civil Practice and Remedies Code allows an order “enjoining the judgment debtor from dissipating or transferring assets to avoid satisfaction of the judgment,” so long as the order leaves the debtor’s normal course of business alone. The debtor’s history of fraudulent transfers amply supported the injunction, and the order carved out ordinary business dealings.

The LLC itself owed nothing on the judgment, so it was not a judgment debtor and could not be enjoined, and the Fifth Circuit struck it from the order. The member remained bound, and as the company’s only member she could not accomplish through the company what the order forbade her to do herself.

A charging order fixes what the creditor may take from the company. A court can still forbid the member to move the company’s assets or the interest while the judgment stands, when the debtor’s conduct supports the order.

What the Texas Charging Order Protects, and What It Leaves Open

The Texas charging order keeps a member’s creditor away from the company’s property and from the membership interest itself, one member or many. The creditor takes the member’s distributions while the judgment is unpaid. A court can appoint a receiver to watch for them and can enjoin the member from moving assets while the judgment stands. Turnover of the interest itself remains available in the four situations above.

Whether section 101.112 makes the interest exempt property in bankruptcy is before the Supreme Court of Texas on the Fifth Circuit’s certified question. As of September 2026 no answer has come. The answer will decide whether a bankruptcy trustee takes the interest for the creditors or leaves it with the debtor.

Texas exempts the homestead, current wages, retirement accounts and life insurance outright. It exempts nothing that sits in a bank or a brokerage account. A company interest under a charging order stands between those two groups, and asset protection in Texas depends on all three.