How does a charging order work?

A charging order is a tool used in New York to protect the assets of a judgment debtor. When a creditor obtains a judgment against a debtor, the creditor may request a court-issued charging order. A charging order gives the creditor the right to collect on the debtor’s assets. The charging order requires that any payments or profits due to the debtor from a particular asset, such as an LLC or partnership, be paid directly to the creditor instead of to the debtor. In New York, the charging order is the exclusive remedy that a judgment creditor has against a debtor’s interest in a limited liability company or limited partnership. This means that the creditor cannot take any other action to collect the debt, such as seizing the debtor’s assets or garnishing their wages. The charging order is a lien against the debtor’s interest in the LLC or partnership, and the lien runs until the judgment is satisfied. Since the charging order is a lien, if the debtor tries to transfer or otherwise dispose of their interest in the LLC or partnership, the court can prevent the transfer as long as the judgment has not been satisfied. The court will also prevent other partners or members from paying the debtor until the judgment is satisfied. The charging order is a powerful tool for creditors to collect on a judgment, but it is also an important part of asset protection law in New York.

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How does a charging order work?

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