The Wrong Kind of Personal Property.

New York is not one of them, and on 12 February 2026 a judge in Albany County demonstrated exactly why. In TBG Funding LLC v. Kenwood Commons, LLC, 2026 NY Slip Op 26027, 2026 WL 504166 (Sup. Ct., Albany County, 12 Feb. 2026) (Marcelle, J.), Index No. 902353-19, Justice Thomas Marcelle ordered four membership interests turned over outright to the judgment creditor’s designee — not charged, not liened, transferred. The creditor did not become an intercepting bystander. The creditor became the owner.

This is the second time this year that a court applying New York law has done so — see Shumener, Odson & Oh LLP v. Saadia Square, LLC, 2026 WL 1266002 (S.D.N.Y. 8 May 2026) (Rochon, J.), granting turnover of a membership interest in SM Logistics Holdco LLC in satisfaction of a $785,346.97 judgment and rejecting the argument that N.Y. Ltd. Liab. Co. Law § 607(a) supplied the exclusive remedy — and the pattern is now old enough to be called a rule rather than an aberration. For anyone holding real assets through a New York-organized entity — or, as we shall see, litigating in New York at all — this is a structural exposure, not a technicality.

The underlying deal was ordinary. Kenwood Commons, LLC borrowed roughly $5 million for a property development. The loan was secured by a mortgage, and it was guaranteed personally by Jacob Frydman and by two irrevocable trusts — the Jacob Frydman 2000 Irrevocable Trust and the Monica Libin 2000 Irrevocable Trust. Kenwood defaulted in late 2018; the lender sued in 2019 and later assigned its rights. At the close of the foreclosure in December 2024 the creditor took a deficiency judgment of $17,885,966.09 against the guarantors. TBG Funding, 2026 WL 504166 (deficiency judgment entered December 2024 following foreclosure; the lender’s rights were assigned, and the judgment was prosecuted by the assignee).

Collection then turned to the guarantors’ other holdings. The two trusts together held interests in two limited liability companies that sat above a Manhattan commercial property: each trust held 8.75% of Tunnel Associates, LLC (a multi-member entity in which the judgment debtors collectively held half) and 50% of Winter Investors, LLC (which the judgment debtors owned entirely). The creditor moved for turnover of those interests, and asked for charging orders only in the alternative. Id.

The debtors raised the argument every LLC owner assumes will work: the operating agreements contain transfer restrictions. Tunnel’s agreement barred any member from selling, assigning, pledging or otherwise transferring a membership interest without the managers’ written consent; Winter’s required a member holding under 75% to offer the interest to the other members first. This is the “pick your partner” principle — the idea that the non-debtor members should not be forced into business with a stranger who happens to hold a judgment.

It did not work. The court held that a membership interest is personal property under New York’s LLC Law, N.Y. Ltd. Liab. Co. Law § 601 (“A membership interest in the limited liability company is personal property. A member has no interest in specific property of the limited liability company.”), that it is “clearly assignable and transferable” for purposes of Article 52 of the CPLR, and — the sentence that matters most — that although § 607(a) permits a charging lien, “it does not say that this is the creditor’s exclusive remedy, nor does it purport to abolish or limit CPLR 5225(a).” TBG Funding, 2026 WL 504166, quoting 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589 (1st Dep’t 2022); the court added that “LLC 607(a)’s provision for charging orders merely gives the court the discretion to issue a charging order. It does not mandate the charging order as an exclusive remedy.” Section 607(a), the court concluded, gives a court discretion to issue a charging order. It does not make the charging order the only door.

On the two entities the reasoning diverged in a way planners should read closely. As to Winter, the debtors owned 100% and managed it themselves, so the rationale for honouring a pick-your-partner clause “disappears” — there was no partner to protect. As to Tunnel, there were non-debtor members with a real interest in who joined them. They simply did not intervene. The court reserved charging orders for cases where “non-debtor members or the LLC seek to intervene,” and, none having appeared, ordered turnover there as well. Id.

All four interests — 8.75% of Tunnel from each trust, 50% of Winter from each trust — were ordered turned over to the creditor’s designee.

The distance between the two remedies is not a matter of degree.

A charging order is a garnishment of a stream. The creditor is treated as an assignee of distributions and nothing more; under New York law he acquires no management rights and no claim on company property. N.Y. Ltd. Liab. Co. Law § 607(a) (charging creditor has only the rights of an assignee of the membership interest); id. § 607(b) (“No creditor of a member shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the limited liability company.”); see also id. § 603(a)(3) (assignee may not participate in management or exercise the rights of a member). If the manager exercises legitimate business judgment and retains earnings, the creditor waits. He holds a straw in a glass that may never be filled.

A turnover order under CPLR 5225(a) moves the asset. The creditor — or, as here, the creditor’s designated vehicle — takes the interest itself, in whole or partial satisfaction of the judgment. Where the entity was wholly owned by the debtor, that means the creditor now stands where the owner stood. The court’s equitable authority under CPLR 5240 to shape enforcement procedure lets it direct the transfer straight to the creditor rather than through a sheriff’s sale. N.Y. C.P.L.R. 5225(a) (turnover of personal property in the judgment debtor’s possession); id. 5240 (court may make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure).

One remedy leaves the structure intact and makes collection unattractive. The other ends the structure.

The judgment debtors here were not only an individual. Two of them were irrevocable trusts settled in 2000 — instruments that had been in place for a quarter of a century before this order issued.

Seasoning did not save them, and it was never going to, because seasoning answers a different question. A trust funded years before any claim is defensible against a fraudulent-transfer attack: there was no creditor to hinder, delay or defraud when the assets moved, so the badges of fraud have nothing to attach to. That protection was almost certainly available to these trusts as to the original funding. It was irrelevant. The trusts lost the interests because the trusts had signed the guarantee. They were not third parties whose assets a creditor was trying to reach through some avoidance theory; they were the obligors, and the judgment ran against them directly.

This is the quiet way that good structures are dismantled. Nobody pierces anything. Nobody proves a sham. A lender simply asks for the trust’s signature on a guarantee at closing — because the trust holds the equity, and the lender wants recourse to the equity — and the protective vehicle converts itself into a defendant. Every hour of planning that went into insulating those assets was undone by a signature page.

The practical discipline is unglamorous and absolute: a structure built to be out of reach must not become a party to obligations. If a lender requires recourse beyond the project, that recourse should come from an entity or an individual whose exposure has been consciously accepted — not from the vehicle whose entire purpose is to stand apart. Where a trustee is genuinely independent, this discipline enforces itself, because an independent trustee has fiduciary reasons to refuse a guarantee that puts the corpus behind someone else’s development loan. Where the settlor is effectively directing the trustee, it does not, and the guarantee gets signed.

The obvious response is to move the entity. Form in Delaware, Nevada or Wyoming, where the legislatures have said what New York declined to say.

Those statutes are real and they are strong. Delaware provides that entry of a charging order “is the exclusive remedy by which a judgment creditor of a member or a member’s assignee may satisfy a judgment out of the judgment debtor’s limited liability company interest and attachment, garnishment, foreclosure or other legal or equitable remedies are not available,” whether the company has one member or more. Del. Code Ann. tit. 6, § 18-703(d). Wyoming’s provision is broader still, extending exclusivity to sole members, dissociated members and transferees, and expressly directing that foreclosure “may not be ordered by the court.” Wyo. Stat. Ann. § 17-29-503(g). Nevada’s statute is to similar effect. Nev. Rev. Stat. § 86.401 (charging order as the exclusive remedy against a member’s transferable interest, including as to a sole member).

Here is the problem. In 2024 the Second Circuit affirmed a turnover order against a membership interest in HNA North America, LLC — a Delaware limited liability company — in 245 Park Member LLC v. HNA Group (Int’l) Co., 2024 WL 1506798 (2d Cir. 8 Apr. 2024), affirming a post-judgment order directing turnover of HNA Int’l’s membership interest in partial satisfaction of a $185.4 million confirmed arbitration award. The debtor argued precisely what a planner would want it to argue: Delaware law governs whether this interest can be transferred, and Delaware forbids anything but a charging order. The court disagreed, and its reasoning was procedural rather than substantive. Under Federal Rule of Civil Procedure 69(a), enforcement of a money judgment must accord with the practice of the state where the enforcing court sits. Fed. R. Civ. P. 69(a) (post-judgment enforcement procedure “must accord with the procedure of the state where the court is located”). That court sat in New York. New York’s Article 52 reaches any property that can be assigned or transferred, and the Court of Appeals had already held in Hotel 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303, 926 N.E.2d 1202 (2010), that a membership interest — including in an out-of-state LLC — is such property. Delaware’s exclusivity statute never got to speak.

The lesson is one that the asset-protection industry states far less often than it should: the state of organization supplies the entity’s internal law, but the forum supplies the collection law. A Wyoming certificate of organization is not a passport. If the creditor can obtain and enforce a judgment in New York, New York’s enforcement toolkit is the one that will be used, whatever the entity’s birth certificate says. Choosing a strong charging-order state buys real protection when the fight happens there. It buys considerably less when the client, the assets, the lender and the litigation are all in Manhattan.

Nothing in Kenwood Commons suggests that charging-order planning is dead. It suggests something narrower and more useful: that charging-order protection is a function of forum, not of formation, and that it has to be engineered accordingly.

Four points follow for anyone reviewing an existing structure.

Look at where a judgment would actually be enforced. The relevant question is not “where is the LLC organized” but “where will a creditor sue, and where are the assets that court can reach.” A New York operating business held by a New York family and financed by a New York lender is a New York problem regardless of what the certificate says. Where a genuine, non-artificial nexus to a stronger jurisdiction exists — real management, real assets, real administration — it is worth building. Where it does not, siting alone should not be sold as protection.

Keep the protective vehicle out of the obligation. This is the Kenwood Commons lesson in one line. A trust that guarantees, indemnifies or co-signs has volunteered to be a judgment debtor, and no amount of seasoning, irrevocability or discretion cures that.

Non-debtor members should not stay silent. The Albany court expressly held open the possibility of a charging order where the other members or the company intervene to assert their pick-your-partner rights. In Tunnel, nobody did, and the court read the silence as consent to the harsher remedy. Where a family entity has legitimate outside members, their willingness and standing to appear is part of the structure’s defensive strength — and operating agreements should be drafted with that eventuality in view, not merely with boilerplate transfer restrictions that a court can find unasserted.

Single-member entities are the weakest link. Winter Investors fell first and most easily because there was no partner whose interest the pick-your-partner clause could protect. Even in exclusivity states the single-member LLC has historically drawn the closest judicial scrutiny; in New York it invites the most direct result available.

For clients whose exposure justifies it, the more durable answer remains the one the Watchtower has returned to before: a seasoned, irrevocable, discretionary trust with a genuinely independent trustee, funded long before any claim was foreseeable, holding entity interests in a jurisdiction whose legislature has made the charging order the sole and exclusive remedy — Nevis being the paradigm, where the Nevis Limited Liability Company Ordinance, Cap. 7.04(N), § 60, limits a judgment creditor to a charging order that expires after three years and cannot be renewed, and whose precise mechanics should be read against the current consolidated text. That combination works not because any single element is impregnable, but because it removes the debtor from the chain: the client is not the owner, the trust is not the obligor, and the creditor’s judgment therefore has nothing to attach to except a discretionary interest that a trustee owes him no duty to fund.

Kenwood Commons is, in the end, a case about a signature and a statute. The statute is New York’s, and it is a drafting choice the legislature has left uncorrected for thirty years: § 607 says a court may charge a membership interest, and New York courts have now said plainly and repeatedly that “may” is not “must,” and that CPLR 5225(a) remains open beside it. N.Y. Ltd. Liab. Co. Law § 607(a); see TBG Funding, 2026 WL 504166; Shumener, 2026 WL 1266002; 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589 (1st Dep’t 2022). The signature is the guarantee that two twenty-five-year-old irrevocable trusts put on a development loan, converting the shelter into the target.

The first of those is a jurisdictional fact to be planned around. The second was avoidable, and it is the one that should give planners pause — because it is the failure mode that looks like nothing at all at the time it occurs. A structure is not tested on the day it is drafted. It is tested on the day someone asks it to sign something.