What is Charging Order Protection

Let’s just say you have a piece of property or a business or some kind of a valuable asset that you own in an LLC, a limited liability company. This LLC is owned by two individuals and these are business partners, Sally and John. They’re not married, that’s an important distinction. They’re simply business partners. Let’s assume John gets into some trouble. So now there’s a judgment personally, what are the options? What ends up happening is the creditor now owns 60% of the entity and Sally owns 40% of the entity. And frankly, the creditor has really no interest in running this business or running this piece of property. They just want to liquidate and get paid. What the laws have come up with in every single state, all 50 states have this, is actually doing a charging order protection, which is instead of giving the creditor ownership in the 60% of the LLC, what the creditor ends up getting is just the financial rights.

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