Judgment Debtors as LLC Members: How LLC Law § 607 Constrains Creditor Remedies

By: Jeffrey M. Haber

New York’s Limited Liability Company Law § 607 limits the remedies available to a creditor when the judgment debtor is an LLC member, confining recovery to the member’s economic interest and prohibiting any direct interference with LLC property. As demonstrated in Finance Holding Co., LLC v. Farzam, 2026 N.Y. Slip Op 31868(U) (Sup. Ct., N.Y. County Apr. 7, 2026), courts use the statute to protect the separation between the LLC and its members.

Finance Holding involved a judgment enforcement action in which the petitioner sought to satisfy a nearly $2 million judgment against an individual LLC member by targeting his interests in two LLCs that owned residential apartment buildings. Through a series of motions, the motion court addressed the permissible scope of relief under LLC Law § 607, rejecting attempts to reach LLC assets or control their operations while permitting remedies directed solely at the debtor‑member’s economic interests.

Finance Holding Co., LLC v. Farzam

Finance Holding is a judgment-enforcement proceeding that arose as a consequence of petitioner obtaining a judgment against respondent for $1,903,366.57 in a related action. In that action, petitioner was seeking to enforce that judgment against respondent directly. In Finance Holding, petitioner moved to enforce its judgment against respondent’s ownership interests in two LLCs that own residential apartment buildings (“respondent LLCs”).

Before the motion court were three motions. The first motion involved an order to show cause brought by petitioner seeking relief directed at respondent’s membership interests in the respondent LLCs. In response (the second motion), respondent filed a motion to dismiss the petition insofar as it sought relief against his wife. Separately, respondent’s wife filed her own motion to dismiss the petition as against her and sought attorney’s fees as a sanction under 22 NYCRR 130‑1.1 (the third motion).

The motion court denied respondents’ motions. Respondent’s motion to dismiss was denied because he was not admitted to practice law in New York and, therefore, lacked the authority to appear or seek relief on behalf of another party, including his wife. As to the wife’s motion, petitioner clarified that she had been named in the proceeding solely to provide notice, based on her status as a 50 percent member of the respondent LLCs, and that no substantive relief was being sought against her personally. In light of that representation, the motion court denied the request for dismissal as academic. The motion court also denied the wife’s request for sanctions, finding that adding her to the proceeding for notice purposes did not constitute frivolous or vexatious conduct within the meaning of 22 NYCRR 130‑1.1.

With those rulings, the motion court turned to petitioner’s motion on the merits. Petitioner sought a range of relief related to respondent’s interests in the respondent LLCs, including a turnover order, an order charging or garnishing his membership interests, appointment of a receiver over the LLCs, injunctive relief restraining the transfer of membership interests, a declaration establishing priority over other actual or potential creditors, and an award of attorney’s fees. The motion court granted in part and denied in part petitioner’s motion.

In so ruling, the motion court determined that the majority of the relief sought by petitioner was unavailable as a matter of law. The motion court focused on the limits placed on a judgment creditor’s ability to pursue relief against assets owned by limited liability companies when the judgment is against an individual member. Respondents argued, and the motion court agreed, that because petitioner’s requested relief against the LLCs derived solely from its judgment against respondent as an LLC member, that relief was subject to Limited Liability Company Law (“LLC Law”) § 607. That statute bars a creditor of an LLC member from “obtain[ing] possession of, or otherwise exercising legal or equitable remedies with respect to, the property of the limited liability company.”[1]  In practical terms, LLC Law § 607 protects an LLC’s assets and operations from being disrupted by the creditors of individual members.

Applying LLC Law § 607, the motion court concluded that several categories of relief sought by petitioner were barred. Petitioner sought turnover of funds and real property held by the respondent LLCs, garnishment of proceeds from any sale of LLC assets or property, and injunctive relief preventing respondents from selling or otherwise disposing of LLC-held property. The motion court found that each of these requests would improperly allow petitioner, as a creditor of an individual member, to reach or control LLC property directly. Because the statute forecloses that result, the motion court denied the requested relief as statutorily unavailable.[2]

The motion court next addressed petitioner’s request for a declaratory judgment establishing that it had priority over all other creditors of respondent in collecting proceeds necessary to satisfy the judgment. The motion court found this request procedurally and substantively deficient. The motion court noted that priority disputes among creditors are ordinarily resolved through proceedings that join adverse claimants, such as those contemplated by CPLR 5239.[3] In Finance Holding, however, petitioner had neither identified nor joined any other creditors whose rights would be affected by the requested declaration.[4] Petitioner also failed to allege that any such competing creditors even existed.[5] Without adverse parties or a concrete dispute over priority, the motion court concluded that there was no justiciable controversy for it to resolve.[6] As a result, the motion court denied that portion of petitioner’s motion.[7]

The motion court thereafter addressed petitioner’s request for a turnover order and a charging order with respect to respondent’s membership interests in the LLCs. The motion court noted that under LLC Law § 607, a court has the authority to impose a charging order on respondent’s LLC membership interests.[8] Alternatively, said the motion court, a court could, but was not required to, direct turnover of respondent’s LLC membership interests to petitioner as judgment creditor.[9] 

“In choosing between these remedies,” the motion court took “into account that directing turnover would have the undesirable effect of making petitioner and [respondent’s wife] involuntary equal partners in the management of the buildings owned by the LLC respondents—over [the wife’s] strong objection.”[10] Additionally, explained the motion court, “petitioner [did] not explain why turnover would be more effective than a charging order for purposes of petitioner’s efforts to collect on its judgment against [respondent].”[11] Therefore, the motion court concluded “that imposing a charging order, rather than directing turnover, [was] the appropriate remedy.”[12] 

The motion court also denied petitioner’s request for the appointment of a receiver over respondent’s LLC membership interests and over the apartment buildings owned by the respondent LLCs, finding that petitioner failed to demonstrate the “special reason” required to justify such relief.[13] The motion court noted that petitioner did not show it had exhausted other, less intrusive means of enforcing the judgment, such as levying against real property owned by respondent personally.[14] Nor did petitioner explain how a receivership would be more effective in satisfying the judgment than a charging order directed at respondent’s membership interests.[15]

The motion court also emphasized that the scope of the proposed receivership was overly broad. Rather than being limited to respondent’s interests in the respondent LLCs, petitioner sought a receiver with authority over the day‑to‑day operation, sale, and management of the apartment buildings owned by the LLCs.[16] The motion court found this particularly problematic, especially given that respondent holds only a 50 percent interest in the respondent LLCs.[17] Petitioner failed to address how appointing a receiver would affect or operate alongside the 50 percent ownership interest of respondent’s wife.[18] In light of these deficiencies, the motion court denied that request.

Finally, the motion court rejected petitioner’s request for broad injunctive relief because a judgment creditor may not restrict an LLC’s control over its own assets and petitioner provided no basis for relief against respondent’s non‑debtor wife.[19] However, the motion court granted injunctive relief against respondent, enjoining him and his agents from transferring or disposing of his LLC membership interests and from dissipating any income, distributions, or proceeds payable to him from the LLCs.[20]

Takeaway

Focusing on LLC Law § 607, Finance Holding underscores the limits New York law places on judgment enforcement when the judgment debtor is an LLC member rather than the LLC itself. The central takeaway of the holding is that Section 607 operates as a statutory shield for LLC property, preventing a member’s creditors from reaching, controlling, or interfering with the assets owned by the LLC.

The decision also illustrates that a creditor’s remedies are confined to the debtor‑member’s interest in the LLC. Section 607 bars turnover orders, garnishment, receiverships, and injunctions that would effectively give the creditor control over LLC property or management. As shown in Finance Holding, courts reject attempts to bypass this rule, especially where the requested relief would disrupt the LLC’s affairs or prejudice other members who are not judgment debtors.

A related takeaway from the Finance Holding decision is the preference, under Section 607, for charging orders as an enforcement mechanism. A charging order allows a creditor to place a lien on distributions payable to the debtor‑member without altering ownership, governance, or control of the LLC. Finance Holding emphasizes that courts are reluctant to order turnover of membership interests or appoint receivers, where doing so would force non‑consensual business relationships, interfere with management, or go beyond the debtor’s economic rights, especially when the debtor owns less than 100% of the LLC.

Overall, the key lesson of Finance Holding is that when a judgment debtor is an LLC member, Section 607 limits enforcement to the judgment debtor’s economic interests only. Courts will enforce those limits rigorously, protecting LLC assets and non‑debtor members from collateral damage while still allowing creditors a defined path to judgment recovery.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm.

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[1] Slip Op. at *3, quoting LLC Law § 607(b).

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] Id., citing Premier Restorations of N.Y. Corp. v. New York State Dept. of Motor Vehs., 127 A.D.3d 1049, 1049 (2d Dept. 2015) (describing requirements for availability of declaratory-judgment claim).

[7] Id. Also, the motion court denied petitioner’s request for an award of attorney’s fees. The motion court explained that attorney’s fees are not recoverable in a turnover proceeding brought under CPLR 5225(b), which was one of the statutory bases relied upon by petitioner. Id., citing  Bienstock v. Greycroft Partners, L.P., 128 A.D.3d 459, 459 (1st Dept. 2015). Although petitioner sought additional forms of relief under other statutes, it did not identify any statutory provision authorizing the recovery of attorney’s fees in connection with those remedies. The motion court further emphasized that, absent a contractual or statutory basis, it did not possess inherent authority to award attorney’s fees simply because a party prevailed or incurred expenses. On that basis, petitioner’s application for attorney’s fees was denied in its entirety.

[8] A charging order under LLC Law § 607 is a court-ordered lien placed on a debtor-member’s interest in an LLC, requiring the company to pay any distributions – profits or income – directly to the creditor instead of the member until the judgment is satisfied. It is a remedy for creditors to satisfy personal debts from a member’s LLC interest.

[9] Slip Op. at *3, citing 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589, 589 (1st Dept. 2022); Sirotkin v. Jordan, LLC, 141 A.D.3d 670, 672 (2d Dept. 2016).

[10] Id., citing TBC Funding LLC v. Kenwood Commons, LLC, 2026 N.Y. Slip Op. 26027, at *4 (Sup. Ct., Albany County 2026) (discussing the choice between a turnover order and a charging order).

[11] Id. at *4.

[12] Id.

[13] Id., citing Itria Ventures LLC v. Beaver Street Pizza LLC, 194 A.D.3d 447, 447 (1st Dept. 2021) (internal quotation marks omitted). 

[14] Id.

[15] Id.

[16] Id., Hotez 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303, 418 (2010) (noting that a factor pointing toward granting the plaintiff’s request for the appointment of a receiver is that “plaintiff seeks receivership over defendants’ ownership/ membership interests, not the day-to-day operation of a foreign corporation”).

[17] Id.

[18] Id.

[19] Id.

[20] Id.