- Mike Huseman
LLC Charging Orders
Charging orders are one of the more confusing areas of judgment enforcement law. Ordinarily, a judgment creditor would serve a citation to discover assets and then look to the citation statute for enforcement procedures. Under Section 1402, when non-exempt assets are discovered, the court can compel the judgment debtor to deliver those assets either to the sheriff or a private selling agent for sale. The proceeds of the sale are then applied to the judgment. This is commonly called a turnover order.
However, you can't obtain a turnover order on a judgment debtor's interest in an LLC. In order to do that, you'll need a charging order. Section 30-20(a) of the Illinois Limited Liability Act provides that "on application by a judgment creditor of a member of a limited liability company or of a member's transferee, a court having jurisdiction may charge the distributional interest of the judgment debtor to satisfy the judgment." I just read a case that further clarifies the procedures behind a charging order. The case is Bank of America v. Freed, 2012 IL App (1st) 110749. Here is the relevant paragraph: