My name is Ron Drescher. I’m an attorney
practicing bankruptcy and commercial litigation in Maryland, Delaware, Pennsylvania and Virginia,
and today I want to answer the question what is a charging order. In modern commercial
practice, many entities are limited liability companies. These are entities that have some
of the qualifications of a corporation and some characteristics of a partnership, but
in Maryland at least if a person gets a judgment against someone that’s a member of a limited
liability company, that person can’t just seize that membership interest and sell it
or become a member and operate that business. All that person can get is a charging order,
and what a charging order does is it charges the membership interest or a partnership interest
of a partner with any income that that limited liability company might distribute to the
member who is an owner of the limited liability company. Charging order is sometimes the best
you can get. It’s not terribly powerful because it can’t force the member to give
up their rights in the limited liability company so that the judgment creditor can now control
that company. All it can do is seize the distributions that are being made to that member under the
limited liability company. Sometimes this can be powerful because a member can get money
out of a limited liability company in only a limited number of ways, by salary, by distributions
or by taking loans from a limited liability company. But, if the member is clever, they
might be able to put off a charging order and somehow operate that company to defeat
the rights of the charging order. Nevertheless, it’s an important arrow in the quiver of
a judgment creditor in trying to collect from a debtor. My name is Ron Drescher. I’m an
attorney practicing bankruptcy and commercial litigation, and if your debtor has a membership
interest and you’re trying to get paid, please pick up the phone and call me. I would
love to hear from you.