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Limited Liability Companies & Charging Orders

You have a judgment against an individual who is a member/owner of a limited liability company. Now what? If certain conditions are met, you may be able to obtain a charging order to access the member’s distributions from the LLC.

A charging order is a post-judgment remedy that allows the judgment creditor of a debtor-member of a LLC (or partnership) to enforce a judgment by charging the member’s distributional interest with the unsatisfied amount of a judgment. Section 347.119, RSMo; Willis v. Willis, 750 S.W.2d 567, 574 (Mo. Ct. App. 1988). Section 347.119 provides, among other things, that ” the court may charge the member’s interest in the limited liability company with payment of the unsatisfied amount of the judgment with interest.” That is to say that the charging order requires the LLC to pay over the judgment creditor any distribution that would normally be paid to the judgment debtor.

To obtain a charging order, the judgment creditor must apply for one in the proper court. Id. The application is not self-proving, and the movant has the burden of proving the allegations in support of the application for charging order. Keith v. Burlington N.R. Co., 889 S.W.2d 911, 925 (Mo. Ct. App. 1994). This can come in the form of affidavits, depositions and oral testimony. Powell v. State Farm Mut. Aut. Ins. Co., 173 S.W.3d 685, 689 (Mo. Ct. App. 2005). Exhibits attached to motions generally are not evidence and are not self-proving. Ryan v. Raytown Dodge Co., 296 S.W.3d 471, 473 (Mo. Ct. App. 2009).

Because this is a time-consuming process, consideration needs to be given beforehand whether a charging order is worthwhile. Among other things, a given LLC may not give regular distributions, which would defeat/lessen the “end game” with the charging order.

Contact with questions.