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MEMBERSHIP IN LIMITED LIABILITY COMPANY CAN BE REACHED BY A JUDGMENT CREDITOR; CHARGING ORDER, RATHER THAN ASSIGNMENT OF THE MEMBERSHIP INTEREST TO THE CREDITOR, IS AN APPROPRIATE REMEDY.

The Second Department determined a debtor’s membership in a limited liability company can be reached by a judgment creditor. The court further determined that a remedy other than the assignment of the membership interest to the creditor was properly fashioned by Supreme Court:

In considering the remedies available to a judgment creditor such as the petitioner under CPLR article 52, the Supreme Court was not limited to considering the petitioner’s request for an order assigning to him [the debtor’s membership interest in the LLC. CPLR 5240, which was relied upon by the Supreme Court, provides, in pertinent part, that a court “may at any time, on its own initiative or the motion of any interested person, and upon such notice as it may require, make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure” … . This section grants the Supreme Court broad discretionary power to alter the use of procedures set forth in CPLR article 52 … . Limited Liability Company Law § 607 expressly provides that, on an application by a judgment creditor of a member of an LLC, “the court may charge” the debtor’s membership interest “with payment of the unsatisfied amount of the judgment with interest,” and “[t]o the extent so charged, the judgment creditor has only the rights of an assignee of the membership interest.” Thus, CPLR 5240 and Limited Liability Company Law § 607 give the court discretion, in an appropriate case, to issue a charging order instead of, inter alia, an order assigning or turning over the judgment debtor’s membership interest in an LLC to the judgment creditor … . Matter of Sirotkin v Jordan, LLC, 2016 NY Slip Op 05576, 2nd Dept 7-20-16

DEBTOR-CREDITOR (MEMBERSHIP IN LIMITED LIABILITY COMPANY CAN BE REACHED BY A JUDGMENT CREDITOR; CHARGING ORDER, RATHER THAN ASSIGNMENT OF THE MEMBERSHIP INTEREST TO THE CREDITOR, IS AN APPROPRIATE REMEDY)/CIVIL PROCEDURE (DEBTOR-CREDITOR, MEMBERSHIP IN LIMITED LIABILITY COMPANY CAN BE REACHED BY A JUDGMENT CREDITOR; CHARGING ORDER, RATHER THAN ASSIGNMENT OF THE MEMBERSHIP INTEREST TO THE CREDITOR, IS AN APPROPRIATE REMEDY)/LIMITED LIABILITY COMPANY (DEBTOR-CREDITOR, MEMBERSHIP IN LIMITED LIABILITY COMPANY CAN BE REACHED BY A JUDGMENT CREDITOR; CHARGING ORDER, RATHER THAN ASSIGNMENT OF THE MEMBERSHIP INTEREST TO THE CREDITOR, IS AN APPROPRIATE REMEDY)

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