Court Denies Garnishment of Member’s LLC Distributions
A writ of garnishment is a collection tool that gives the judgment creditor the right to collect a debt owed to the debtor. In a Florida appellate case decided earlier this year a judgment creditor convinced a trial court to issue a writ of garnishment against a limited liability company to garnish distributions that the LLC owed to the judgment debtor by virtue of his membership interest.
On appeal, the appellate court reverse the lower court’s issuance of the garnishment based upon Florida’s 2011 amendment to the LLC statute pertaining to creditor collection rights. Section 605.433(5) provides that a charging order is the sole and exclusive remedy by which a creditor of an LLC member may satisfy a judgment against the member. The court held that a writ of garnishment, which otherwise might be used to intercept money payable by the LLC to the member, could not be used because it would directly contradict the LLC statute.
This is the first decision I am aware of where an appellate court enforced the “sole and exclusive” provision of the 2011 charging lien provision.
About the Author
Jon Alper is an expert in asset protection planning for individuals and small businesses.
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