Q: You obtain a large
judgment against an individual and you want to collect. The judgment debtor has
only one asset - he is a member of a NJ limited liability company (ie. he is
an owner of the LLC). Can you force the
sale of his ownership interest?
A: No. As a judgment creditor, you have
the exclusive remedy of obtaining a Charging Order, which
is a lien against the judgment debtor’s transferrable interest in the LLC and entitles you to
payment of any distributions that would otherwise be paid to the judgment
debtor. Unfortunately, since LLC members have control of whether and to
what extent such distributions are made, judgment creditors cannot force
payment and turnover of distributions. Charging Orders, therefore, are a “watch
and wait” proposition - a remedy with questionable potential return.