How Does A Judgment Creditor Execute (Collect) Against An Individual’s Membership Interest In A Florida Limited Liability Company – South Florida Commercial Litigation And Collection Attorney

The Florida Limited Liability Company Act, which is located in Florida Statutes 608.401 – 705, provides that a judgment creditor to any member of a limited liability company may obtain a charging order against the member’s interest in the company or foreclose that interest in the company under certain circumstances. As to the charging order, the Florida LLC Act provides “On application to a court of competent jurisdiction by any judgment creditor of a member or a member’s assignee, the court may enter a charging order against the limited liability company interest of the judgment debtor or assignee rights for the unsatisfied amount of the judgment plus interest.”

A charging order issued under this provision acts as a lien on the member’s interest in the limited liability company and grants the judgment creditor the right to receive distributions from the company which the member would have otherwise been entitled to receive. Generally, a charging order is the sole and exclusive remedy by which a judgment creditor may satisfy a judgment from a member’s interest in a limited liability company or distributions therefrom. However, where the limited liability company has only one member, the Florida LLC Act allows a judgment creditor to foreclose the member’s interest in the company as follows:

If a judgment creditor of a member establishes to the satisfaction of a court of competent jurisdiction that distributions under a charging order will not satisfy the judgment within a reasonable time, a charging order is not the sole and exclusive remedy by which the judgment creditor may satisfy the judgment against a judgment debtor who is the sole member of a limited liability company and upon such showing, the court may order the sale of that interest in the limited liability company pursuant to a foreclosure sale. A judgment creditor may make a showing to the court that distributions under a charging order will not satisfy the judgment within a reasonable time at any time after the entry of the judgment and may do so at the same time that the judgment creditor applies for the entry of a charging order. The purchaser of the member’s interest at a foreclosure sale steps into the shoes of the member for all purposes and the member loses all interest and rights in the company.

If a judgment creditor has to actually has to file an application with a court of competent jurisdiction to attempt to collect on its judgment, it is more than likely caused by the fact that the judgment debtor (the defendant) is attempting to avoid its legal obligations to pay the judgment creditor. So the question becomes, how does a judgment creditor determine if the judgment debtor (the defendant) has an interest in any limited liability companies and, if the limited liability company is a foreign (other than Florida limited liability company), how does a Florida court get jurisdiction over the foreign company to enforce the lien? These are questions that we will be able to assist you with.

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