“Asset protection is a legitimate, legally sanctioned objective; though one that has limitations of its own.” The timing of asset protection planning can be critical when it comes to these “limitations.” By the time a creditor is reasonably foreseeable, the creditor may be able to stop or unwind transfers of assets whether through obtaining an injunction, action under the fraudulent transfer act, action under the voidable transactions act, or otherwise. As will be discussed here, courts do not look kindly upon those who seek to avoid payment of judgments. Therefore, asset protection planning should be handled as part of general legal structuring well in advance of any potential creditor’s claim.
I have written before about the fact that a “charging order,” essentially a lien on an LLC member’s interest in distributions, is not an asset protection panacea.[2] Certainly, a charging order is protective of an LLC and the non-debtor members. That is largely the point in generally limiting creditors’ remedies against a debtor-member to a lien on the debtor-member’s distributions requiring the LLC to pay to the creditor any distribution which would be made to the debtor-member. However, when the LLC operates in violation of the charging order or other members assist in attempts to circumvent the charging order, courts often step in to aid creditors.
Earthgrains
In one of my previous charging order writings, I discussed Earthgrains.[3] To summarize, Earthgrains Baking Companies, Inc. obtained a judgment against Leland Sycamore and Sycamore Family Bakery, Inc. A U.S. District Court in Utah, applying Utah law,[4] granted Earthgrains a charging order against Leland’s interests in Sycamore Family, LLC. Years later, the court found that Leland and the LLC had violated the charging order by diverting LLC funds to other members on Leland’s behalf while not making any payments to Earthgrains. Finding contempt, the court appointed a receiver who suggested the LLC should be forced to sell its assets in funding payments to Earthgrains towards its judgment. The court agreed.
In a newer opinion from the Tenth Circuit Court of Appeals, it is clear that the parties continue to be at odds.[5] Leland’s son and the LLC sought to terminate the charging order and receivership. Their reasoning was that, under Utah law, judgments expire after eight years. Given that it had been more than eight years from entry of the first judgement against Leland (there was an original judgment and a subsequent amended judgment) and Earthgrains had not renewed its judgment before expiration, they argue the charging order and receivership are now properly terminated.
First, the court found that Leland’s son, Tyler, lacked standing. He is not a party to the judgment and there was no evidence he would suffer any harm if the charging order and receivership continued. As such, the court found he lacked any standing to participate in the litigation. However, the court found the LLC had standing as the entity against which these orders applied. Even though not an original party, the LLC was allowed to proceed in litigating its positions. Next, the court addressed expiration of the eight-year period. Beginning from the date of the amended judgment,[6] the court found the eight-year period was tolled by 688 days by application of certain stays granted by the trial court with respect to Earthgrains collection actions. One stay was granted pending the LLC’s appeal requiring certain LLC owned real estate be sold. The next stay was granted due to a change in the LLC’s counsel. Combined, these stays totaled 688 days. In addition, the trial court applied equitable tolling due to the Sycamores’ “contempt, obstruction, and gamesmanship.” The appellate court did not address equitable tolling since it was unnecessary after application of tolling to the amended judgment. Ultimately, Earthgrains was allowed to renew its judgment with the receivership and charging order remaining in place.
This case has taken years and resulted in a number of trial and appellate court opinions. Obviously, this is costing the parties significant legal fees. While the Sycamore family appears to have engaged in plenty of post-judgment “contempt, obstruction, and gamesmanship,” they have not been able to thwart Earthgrains’ collection efforts. At best, they have merely been able to delay collection. It is quite possible that the Sycamore family have only ended up giving Earthgrains grounds to pursue, and succeed, in obtaining the receivership, sale of LLC assets, etc. These post-judgment efforts have not worked, but rather appear to have made things worse for Leland and his family.
Beall
In Beall,[7] The Ohio Casualty Insurance Company obtained a judgment against Kenneth and Deborah Beall. While the litigation was ongoing that ultimately led to this judgment, Kenneth and Deborah were actively forming new LLC’s and transferring individually-owned assets to the LLCs. After entry of the judgment, the creditor sought a charging order against these LLCs and an injunction preventing Kenneth and Debroah from transferring any of their LLC membership interests until the judgment is satisfied.
Here, although the transfers to the LLCs were not reversed (although it may be possible for that to happen upon the creditor’s request to apply the Uniform Fraudulent Transfers Act), the court clearly was not pleased with the debtors’ attempts to move assets out of the direct reach of their creditor. While these steps occurred before the judgment was entered, they happened while the litigation that resulted in the judgment was ongoing. Clearly, it was reasonably foreseeable that a judgment could be entered against Kenneth and Deborah. Here, the court was willing to offer the creditor more than the charging order due to that conduct.
Verrichia
Here,[8] SB PB Victory, L.P. held a judgment against Thomas Verrichia, among others. In previous proceedings, the court issued orders compelling Thomas and his wife, Nancy, to respond to subpoenas and attend depositions which they had previously ignored.[9] The court also had appointed a receiver over Thomas’ interests in 29 legal entities which were also subject to charging orders. Even before the more recent opinion, it is worth noting that “a receivership is considered an ‘extraordinary’ remedy that is ‘justified in extreme situations.’”[10] As such, before we get to the court’s more recent opinion, it is quite clear that the court was not impressed with Thomas’ efforts to avoid payment on the judgment against him. He had been compelled to respond to subpoenas and had a receiver appointed over legal entities. Also, the court found substantial transfers from Thomas to Nancy as well as among various legal entities, in an apparent attempt to avoid payment of the judgment. These entities operated from the same location, had no employees, and intermingled bank accounts.
In the recent opinion, the court addressed the creditor’s motion to expand the receivership to cover “all assets” of the Verrichias and for an injunction to disclose the location of assets, relinquish control of certain legal entities, and surrender books and records to the receiver. In addressing this motion, the court notes that, for more than two years, the creditor has been unable to satisfy its judgment even after the previous orders. The LLCs had been collecting rents on real properties, but had not made any payments to the creditor. The court found there was evidence of fraud and imminent danger of assets being lost, injured, diminished in value, or squandered, by Thomas and Nancy.[11] Using its inherent equitable powers, the court agreed with the creditor in part. The court expanded the receivership, but not to “all assets” or hypothetical, future LLCs (although the court said “should the Verrichias attempt to circumvent collection of the judgments by creating new LLCs, the Court may revisit this conclusion”). Also, the court used its inherent equitable powers to require the Verrichias “to fully cooperate with the receiver and not frustrate the receiver’s duties.”
Conclusion
In each of these cases, courts went beyond merely issuing a charging order against LLC interests. Courts issued injunctions, appointed receivers, compelled the sale of assets, and offered to go further if needed using the court’s equitable powers or under court’s power to issue orders to “give effect” to the charging order.[12] Meanwhile, the parties to these matters have incurred significant legal fees, had family brought into the litigation, and likely increased the amount of the judgments against them through interests and the creditors’ recoverable expenses, which may include the creditor’s attorneys’ fees. These efforts may have succeeded in delaying collection but ultimately have not prevailed.
As stated above, “asset protection is a legitimate, legally sanctioned objective.” There should be nothing wrong with structuring one’s affairs in a way to protect their assets from third parties. This right is well recognized in the liability protections offered through corporations, LLCs, limited partnerships, and other entities (both protecting the entity’s assets from the owners’ creditors and protecting the owners from the entity’s creditors). Likewise, in addition to traditional spendthrift trusts funded other than through fraudulent or voidable transfers,[13] many states now protect assets held in trusts where the trust’s settlor remains a beneficiary in their domestic asset protection trust statutes.[14]
With this background, it seems clear that proactive asset protection planning, before the existence of a reasonably foreseeable creditor,[15] can protect assets from third parties. This planning may include the use of legal entities or trusts.[16] Such planning also may involve family ownership of certain assets. Properly planned and structured in compliance with relevant legal requirements (state law, federal debt collection law, bankruptcy laws, etc.), courts generally should respect those measures. However, once a creditor exists or is foreseeable, courts are not forgiving to a debtor’s efforts to avoid payment. This can be seen in the cases discussed here. Not only is a charging order not the panacea many planners suggest, and forming an LLC in a more protective state does not necessarily bind creditors to that state’s laws, but courts also have broad powers to enforce the rights of creditors.
The lesson here should be to engage in asset protection planning early, using legally sanctioned structures. Once the creditor is on your doorstep, it can be too late.
[1] In re Blasingame, 920 F.3d 384 (6th Cir. 2019). This case is discussed in Edmondson, Gray, “Sixth Circuit Approves Asset Protection Through Trusts,” March 12, 2020, https://esapllc.com/blasingame-asset-protection/.
[2] Edmondson, Gray, “Charging Orders – SE Property Holdings, LLC,” Jan. 25, 2022, https://esapllc.com/charging-orders-se-property-holdings-llc-2022/, and Edmondson, Gray, “A Tale of Two Charging Orders,” March 23, 2022, https://esapllc.com/a-tale-of-two-charging-orders/. As for charging orders, the law can differ somewhat from state-to-state, but the Mississippi charging order statute is at Miss. Code Ann. § 79-14-703.
[3] Id.
[4] There were arguments made among the parties that Nevada law should apply since the LLC was formed in Nevada. However, the court held applied Utah law asserting that the charging order did not affect the “internal affairs” of the LLC and that the debtor-member resided in Utah. Earthgrains Baking Companies, Inc. v. Sycamore Family Bakery, Inc., 2015 WL 5009376. See also, Edmolndson, Gray, “Where Should You Form Your LLC – Creditors’ Rights?.” May 16, 2023, https://esapllc.com/where-should-you-form-your-new-llc-creditors-rights-2023/.
[5] EarthGrains Baking Companies Inc. v. Sycamore Fam. Bakery Inc., 2025 WL 1662707 (10th Cir. June 12, 2025).
[6] The opinion discusses the issue of whether the original or amended judgment should be the relevant date for counting the eight year period and applies Utah law in finding the date of the amended judgment is the proper date.
[7] Ohio Casualty Insurance Company v. Beall, 2025 WL 726860 (M.D. Ga. Mar. 6, 2025).
[8] SB PB Victory, L.P. v. Tonnelle N. Bergen, LLC, 2025 WL 2394042 (E.D. Pa. Aug. 18, 2025).
[9] SB PB Victory, LP v. Tonnelle N. Bergen, LLC, 2025 WL 2087779 (E.D. Pa. July 24, 2025).
[10] SB PB Victory, L.P. v. Tonnelle N. Bergen, LLC, 2025 WL 2394042 (E.D. Pa. Aug. 18, 2025), citing Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc. 999 F.2d 314, 316 (8th Cir. 1993).
[11] Id.
[12] See § 503(b) of the Uniform Limited Liability Company Act.
[13] See Edmondson, Gray, “Creditors Rights to Trust Assets – Mississippi Law Update,” July 16, 2020, https://esapllc.com/2020msutcarticle5/ and Edmondson, Gray, “Can the IRS Levy on Trust Assets,” Feb. 1, 2023, https://esapllc.com/can-the-irs-levy-on-trust-assets-2023/.
[14] See, e.g., Durham, Parker, “Mississippi Domestic Asset Protection Trusts – A Viable Asset Protection Method,” July 16, 2025, https://www.esapllc.com/mississippi-dapt-asset-protection-method-2025/.
[15] Note that this writing does not intend to address the specifics of fraudulent transfer or voidable transaction statutes, or similar legislation. States differ in this regard, for example, with respect to whether the particular creditor seeking to collect must have been foreseeable when transfers occurred (i.e. not a different creditor), whether certain transfers are voidable even without the existence of foreseeable creditors, etc.
[16] In this regard, see the recent writing, Durham, Parker, “Inter Vivos QTIP Trusts: A Strategic Estate and Asset Protection Planning Option,” Aug. 20, 2025, https://esapllc.com/inter-vivos-qtip-trusts-2025/.
