{"id":85,"date":"2010-08-17T09:40:53","date_gmt":"2010-08-17T16:40:53","guid":{"rendered":"http:\/\/www.keytlaw.com\/azllclaw\/?p=85"},"modified":"2011-12-03T10:39:17","modified_gmt":"2011-12-03T17:39:17","slug":"bankruptcy-court-sells-debtors-arizona-limited-partnership-interest","status":"publish","type":"post","link":"https:\/\/www.keytlaw.com\/azllclaw\/2010\/08\/bankruptcy-court-sells-debtors-arizona-limited-partnership-interest\/","title":{"rendered":"Bankruptcy Court Sells Debtor’s Arizona Limited Partnership Interest"},"content":{"rendered":"

In July of 2010, the U.S. Bankruptcy Court for Arizona ordered the sale of a debtor’s limited partnership interest in an Arizona limited partnership in disregard of Arizona Revised Statues Section 29-655<\/a>.\u00a0 This Arizona statute that says that the sole remedy<\/strong> of a creditor who gets a judgment against a partner of an Arizona limited partnership is a charging order.\u00a0 A charging order is a court order served on the limited partnership that orders the limited partnership to make any payments of money or distributions of property intended for the judgment debtor to the creditor.\u00a0 When served with a charging order, the limited partnership usually ceases making payments and distributions to the partner who is the judgment debtor, which means the creditor gets nothing from the limited partnership.<\/p>\n

In re Michael L. Gauvin<\/em><\/strong>, the United States Bankruptcy Court ordered the sale of the debtor’s fifty percent interest as a limited partner of an Arizona limited partnership called “Draco Enterprises II, an Arizona limited partnership.”\u00a0 See the Notice of Sale<\/a>.<\/p>\n

Here is the text of Arizona’s charging order statute applicable to Arizona limited partnerships:<\/p>\n

29-341. Rights of judgment creditor<\/p>\n

On application to a court of competent jurisdiction by any judgment creditor of a partner, the court may charge the partnership interest of the partner with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the partner’s partnership interest. This chapter does not deprive any partner of the benefit of any exemption laws applicable to his partnership interest. This section provides the exclusive remedy by which a judgment creditor of a partner may satisfy a judgment out of the judgment debtor’s interest in the partnership<\/strong>.<\/p>\n<\/blockquote>\n

Arizona Revised Statutes Section 29-655<\/a> is the equivalent law for Arizona limited liability companies.\u00a0 This statute states:<\/p>\n

29-655. Rights of judgment creditors of a member<\/p>\n

A. On application to a court of competent jurisdiction by any judgment creditor of a member, the court may charge the member’s interest in the limited liability company with payment of the unsatisfied amount of the judgment plus interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the member’s interest.<\/p>\n

B. This chapter does not deprive any member of the benefit of any exemption laws applicable to his interest in the limited liability company.<\/p>\n

C. This section provides the exclusive remedy by which a judgment creditor of a member may satisfy a judgment out of the judgment debtor’s interest in the limited liability company.<\/p><\/blockquote>\n

Bottom line<\/strong>:\u00a0 Despite these two Arizona statutes that state that the charging order is the exclusive remedy of a creditor that gets a judgment against a partner of an Arizona limited partnership or a member of an Arizona limited liability company, if the partner or member is a debtor in bankruptcy, the bankruptcy court can and probably will sell the interest and give the proceeds to creditors unless the interest is worthless.<\/p>\n","protected":false},"excerpt":{"rendered":"

In July of 2010, the U.S. Bankruptcy Court for Arizona ordered the sale of a debtor’s limited partnership interest in an Arizona limited partnership in disregard of Arizona Revised Statues Section 29-655.\u00a0 This Arizona statute that says that the sole remedy of a creditor who gets a judgment against a partner of an Arizona limited partnership is a charging order.\u00a0 A charging order is a court order served on the limited partnership that orders the limited partnership to make any payments of money or distributions of property intended for the judgment debtor to the creditor.\u00a0 When served with a charging order, the limited partnership usually ceases making payments and distributions to the partner who is the judgment debtor, which means the creditor gets nothing from the limited partnership. In re Michael L. Gauvin, the United States Bankruptcy Court ordered the sale of the debtor’s fifty percent interest as a limited partner of an Arizona limited partnership called “Draco Enterprises II, an Arizona limited partnership.”\u00a0 See the Notice of Sale. Here is the text of Arizona’s charging order statute applicable to Arizona limited partnerships: 29-341. Rights of judgment creditor On application to a court of competent jurisdiction by any judgment creditor of a partner, the court may charge the partnership interest of the partner with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the partner’s partnership interest. This chapter does not deprive any partner of the benefit of any exemption laws applicable to his partnership interest. This section provides the exclusive remedy by which a judgment creditor of a partner may satisfy a judgment out of the judgment […]<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[31,63],"tags":[34,32,33],"class_list":["post-85","post","type-post","status-publish","format-standard","hentry","category-asset-protection","category-charging-orders","tag-bankruptcy","tag-in-re-michael-l-gauvin","tag-limited-partnership"],"yoast_head":"\nBankruptcy Court Sells Debtor's Arizona Limited Partnership Interest<\/title>\n<meta name=\"description\" content=\"Arizona bankruptcy court approves the sale of a bankrupt limited partner's interest in an Arizona limited partnership in a case called In re Michael L. 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