In modern commercial practice, many entities are limited liability companies. These are entities that have some of the qualifications of a corporation and some characteristics of a partnership, but in Maryland at least if a person gets a judgment against someone that’s a member of a limited liability company, that person can’t just seize that membership interest and sell it or become a member and operate that business. All that person can get is a charging order; a charging order charges the membership interest or a partnership interest with any income that that limited liability company might distribute to the member who is an owner of the limited liability company.
Relative to other remedies, a charging order is sometimes the best you can get. On the one hand, it’s not terribly powerful because it can’t force the member to give up their rights in the limited liability company so that the judgment creditor can now control that company. All it can do is seize the distributions that are being made to that member under the limited liability company.
On the other hand, sometimes this can be powerful because a member can get money out of an LLC in only a limited number of ways: by salary, by distributions or by taking loans. But, if the member is clever, they might be able to put off the creditor and somehow operate that company to defeat the rights of the charging order. Nevertheless, it’s an important arrow in the quiver of a judgment creditor in trying to collect a debt.
