ARE YOU HOLDING YOUR REAL ESTATE THE RIGHT WAY? GARRETT SUTTON
The charging order protects you in an Attack #2 claim, the outside attack. Again, assume you were in a car
wreck. The accident had nothing to do with your 4 plex. But because your insurance didn’t properly or fully
cover the matter, the judgment creditor wants to get at your assets.
As we said, there are two legal battles to be fought. The first one has already been won. The car wreck victim
went to court and the judge and/or jury awarded a verdict of $300,000. The only way for the judgment creditor
to collect is to get at your 4 plex.
Now the second battle begins. Assume we have a Wyoming LLC owning a Wyoming 4 plex. To get at the
asset, the judgment creditor has to go to a Wyoming court. They must go back into court for a second time to
try and get the 4 plex. The exclusive remedy in Wyoming (and Nevada) is the charging order. The court in
Wyoming will review the judgment creditor’s paperwork to make sure they have a valid claim. Satisfied that it
is, the court then issues the charging order. That charging order ‘charges’ or allows the judgment creditor to
stand in your place and receive distributions from the LLC. It doesn’t allow the judgment creditor to force a sale
of the 4 plex or control how it is operated.
Instead, the charging order just allows for the receipt of distributions as follows:
If money is distributed from the LLC it skips past you to the judgment creditor. What if no distributions are
made? Then the judgment creditor gets nothing.
Remember our contingency fee attorney in all of this? The one who has done all the work and doesn’t want to
sit around waiting to be paid? Does this person like dealing with a charging order?