How does a charging order work?

A charging order is a court order that allows a creditor to collect a debtor’s financial assets. In Washington, when a creditor obtains a court judgment against a debtor, it may ask the court for a charging order to attach the debtor’s interest in a limited liability company or a limited partnership. A charging order gives the creditor the right to receive any distributions of funds made by the company or partnership to the debtor. This means that the creditor can collect the money owed them directly from the limited liability company or limited partnership, instead of going through the debtor. For example, if a debtor had an interest in a limited liability company and a creditor obtained a charging order against that debtor, any distributions of funds from the LLC to the debtor would have to be made to the creditor instead. The creditor could then use that money to recoup their losses. Charging orders are an important tool for asset protection in Washington and other states. They allow creditors to collect money from debtors even when the debtor has limited assets or income. The charging order helps to protect the debtor’s assets from the creditor, while also providing the creditor with a way to recoup the money owed to them.

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How does a charging order work?

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