Colorado § 7-80-703 - Rights of creditor against a member.

§ 7-80-703. Rights of creditor against a member.

On application to a court of competent jurisdiction by any judgment creditor of a member, the court may charge the membership interest of the member with payment of the unsatisfied amount of the judgment with interest thereon and may then or later appoint a receiver of the member's share of the profits and of any other money due or to become due to the member in respect of the limited liability company and make all other orders, directions, accounts, and inquiries that the debtor member might have made, or that the circumstances of the case may require. To the extent so charged, except as provided in this section, the judgment creditor has only the rights of an assignee or transferee of the membership interest. The membership interest charged may be redeemed at any time before foreclosure. If the sale is directed by the court, the membership interest may be purchased without causing a dissolution with separate property by any one or more of the members. With the consent of all members whose membership interests are not being charged or sold, the membership interest may be purchased without causing a dissolution with property of the limited liability company. This article shall not deprive any member of the benefit of any exemption laws applicable to the member's membership interest.

Source: L. 90: Entire article added, p. 433, § 1, effective April 18. L. 97: Entire section amended, p. 1505, § 19, effective June 3. L. 2006: Entire section amended, p. 862, § 31, effective July 1.

ANNOTATION

Law reviews. For article, "Charging Partnership and LLC Interests To Satisfy Debts of Individuals", see 23 Colo. Law. 2743 (1994).

A charging order under this section is not an exclusive remedy for a limited liability company (LLC) judgment creditor member seeking to enforce a judgment against a judgment debtor's interest in the LLC. Although this section is silent on whether it provides an exclusive remedy, the general assembly's varied approach to exclusivity shows that it could have specified that a charging order remedy is exclusive but did not do so in this section. Bartch v. Barch, 111 F.4th 1043 (10th Cir. 2024).

The priority of charging orders issued against Colorado limited liability companies is determined by first-in-time service of charging orders enforceable in the state. Charging orders that are enforceable in Colorado include both those issued by state courts as well as foreign charging orders that have been domesticated in state court. McClure v. JP Morgan Chase Bank, N.A., 2015 COA 117, 395 P.3d 1123, aff'd, 2017 CO 22, 393 P.3d 955.

Where there are no other members in the limited liability company (LLC), the debtor's bankruptcy filing effectively assigned her entire membership interest in the LLC to the bankruptcy estate, and the trustee obtained all of the debtor's rights, including the right to control the management of the LLC. In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003).

Because the trustee became the sole member of the LLC upon the debtor's bankruptcy filing, the trustee controls, directly or indirectly, all governance of that entity, including any decision regarding liquidation of the entity's assets. Therefore, the trustee may cause the LLC to sell its property and distribute net proceeds to the bankruptcy estate. Alternatively, the trustee may elect to distribute the LLC's property to the bankruptcy estate, and, in turn, liquidate the property himself. In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003).