What Is a Charging Order?
So I’m a real estate investor. I have my properties properly structured inside of an LLC. And out of the blue I got into a car wreck. And this resulted in a judgement against me because it exceeded the limits of liability of my auto policy. Now they have tried to record that judgement against my LLC. Can they take it? The answer is no. This is part of the protections that an LLC gives you. It allows you to be able to know that your assets are gonna be protected from the personal actions that you take in your day to day. You’ll know the exact laws that’ll happen inside of your particular state. Because it’ll be under the heading of what’s called a charging order. In most states, the way it works is that they can’t take your membership interest in the LLC, they can’t take over a management function, they can’t force you to sell the assets of your LLC. What they can do is put a lien against your LLC. So that way, if there’s any distributions from that LLC to you that it goes to your creditors. There’s ways around this if you ever end up in that situation. One of the ways that we would think to do that, is by selling your interest in the LLC to another party. But you always want to keep that in mind with what’s gonna happen in your particular state. With what’s known as the charging order. Look it up, make sure you know those laws whenever you’re setting up your LLC to know exactly what the limits are of your liability there before you end up setting up your structure. My name is Scott Smith, I’m an asset protection attorney specializing in real estate. I’m a real estate investor myself and I wanna help you