Also known as: charging orders
Written by attorneys · grounded in primary & secondary sources — see below
A statutory remedy that permits a judgment creditor of a partner or transferee to obtain a lien on the debtor's transferable interest in a partnership or limited liability company. The order requires the entity to pay any distributions that would otherwise go to the debtor directly to the creditor until the judgment is satisfied. Foreclosure of the lien may be available if distributions will not satisfy the judgment within a reasonable time, but the purchaser receives only the economic interest and does not become a partner.
Catherine Carter, Ben, and Carla formed a limited partnership that received a large referral fee. Catherine's interest was subject to a charging order held by her former client. The partners updated contribution values in the required information and decided to distribute the fee. The partnership paid Catherine's allocated share to the creditor rather than diverting it to the other partners.
Caitlin Crowley, Dana, and Leo operated a general partnership that received a cash bonus before dissolution. Caitlin's transferable interest carried a charging order in favor of her judgment creditor. The partnership allocated the bonus in equal shares among the partners and paid Caitlin's portion to the creditor.
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Charles Cunningham held a transferable interest in a limited liability company that was winding up after paying creditors. A charging order encumbered his interest. The company distributed surplus first to return unreturned contributions and then proportionally among owners, paying Charles's share to the judgment creditor.
Curtis Cannon was a limited partner whose interest was subject to a charging order. After the limited partnership paid its creditors during winding up, it distributed surplus by first returning unreturned contributions and then allocating the remainder proportionally, directing Curtis's portions to the creditor.
Cody Callahan obtained a judgment against partner Claire Campbell in a general partnership. The court entered a charging order against Claire's transferable interest. The partnership paid all future distributions that would have gone to Claire directly to Cody until the judgment was satisfied.
A creditor held a charging order against a partner's transferable interest for four years with no distributions paid because earnings funded debt service. The court foreclosed the lien after finding distributions would not satisfy the judgment within a reasonable time. The buyer at the sale received only the economic interest and did not become a partner.
No. The partnership must still allocate interim distributions according to the default equal-share rule or contribution values stated in the required information. The charging order only redirects the charged partner's allocated share to the creditor.
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A court may foreclose when distributions under the charging order will not pay the judgment debt within a reasonable time. The purchaser at foreclosure receives only the transferable economic interest and does not become a partner.
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No. A personal creditor of a partner cannot levy directly on partnership property. The creditor's sole remedy against the partner's interest is a charging order that reaches only the transferable interest.
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No. A charging order is solely a collection device. It does not dissolve the partnership or automatically dissociate the debtor partner unless a separate statutory ground for dissociation is triggered.
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