Thirteen Years of Ignoring a Charging Order.

The case is worth study not because the debtor was clever but because he was not, and the courts’ reasoning maps the exact boundary between what a charging order does and does not do. Radiance Capital Receivables Twelve LLC v. Campbell (In re Campbell), Adv. Pro. No. 24-09009 (KYP), Ch. 7 Case No. 23-35668 (KYP) (Bankr. S.D.N.Y.), Memorandum Decision Denying Defendant’s Motion for Stay Pending Appeal (Paek, J., June 1, 2026). That boundary is the foundation of LLC-based planning, and it is routinely misdescribed in both directions.

The facts are unremarkable until the moment the debtor decides to help himself.

In 2007, Campbell borrowed $305,000 from a predecessor-in-interest of Radiance Capital Receivables Twelve LLC. He defaulted. The lender sued in the United States District Court for the Southern District of Alabama and obtained summary judgment in September 2013. Shortly afterwards, in October 2013 and January 2014, the Alabama court entered two charging orders requiring numerous LLCs in which Campbell held interests to pay Radiance Capital the distributions that would otherwise have gone to him, until the judgment was satisfied in full. Id. at 3.

The LLCs never made a single payment to the creditor. Instead they made dozens of payments directly to Campbell — in the aggregate, “well in excess of the money judgment owed to Radiance Capital.” Id. In June 2023 the creditor moved for contempt in Alabama. Before that motion could be decided, Campbell filed a Chapter 7 petition in the Southern District of New York, staying it. Id.

He received a Chapter 7 discharge on 10 July 2024. It did not help him. Id. at 4 n.4 (order of discharge expressly excepting debts the bankruptcy court has decided or will decide are not discharged).

In the adversary proceeding that followed, Radiance Capital pleaded several theories. One of them failed, and the reason it failed is the most important sentence in the case for planners.

Count I asserted that Campbell’s receipt of the distributions gave rise to liability under Alabama fraudulent-transfer law, and that the resulting debt was non-dischargeable as money obtained by actual fraud under 11 U.S.C. § 523(a)(2)(A). The bankruptcy court granted summary judgment to the debtor on that count. In the course of its analysis it observed that “a charging order under Alabama law does not provide a judgment creditor with the same rights generally enjoyed by a secured creditor.” Id. at 8 n.7, quoting the Memorandum Decision and Order dated January 12, 2026 (the “Summary Judgment Decision”) at 22–23, reported at 676 B.R. 464.

That is the orthodox understanding, and it is the entire commercial logic of the remedy. A charging order does not transfer the membership interest. It does not make the creditor a member. It does not confer management rights, information rights, or the power to force a sale of the company’s assets. It directs the entity to pay over distributions if and when they are made. Where the operating agreement and the governing statute leave distribution decisions to the managers, a creditor holding a charging order may wait a very long time for anything to happen — which is precisely why the remedy exists and why it is the cornerstone of properly structured LLC planning.

Some jurisdictions go further and legislate the point expressly. Nevis, for example, makes the charging order the sole and exclusive remedy against a member’s interest, provides that the order is not a lien on that interest, limits the creditor to distributions actually made, and sunsets the order after three years without renewal. Nevis Limited Liability Company Ordinance, Cap. 7.04(N), § 60. A creditor facing that architecture holds a claim against a tap that an independent manager may simply decline to open.

Having lost on the fraudulent-transfer theory, the creditor won on a narrower and far more dangerous one.

Count II alleged that Campbell “knowingly violated the [charging orders] in an effort to thwart [Radiance Capital’s] security interest in the distributed funds,” acting “intentionally and deliberately despite a substantial certainty that [Radiance Capital] would be injured as a result.” In re Campbell, Memorandum Decision of June 1, 2026, at 8, quoting Adversary Complaint ¶¶ 60–62 (Mar. 5, 2024). The bankruptcy court granted the creditor summary judgment on that theory and ruled, in a Summary Judgment Decision dated 12 January 2026 and reported at 676 B.R. 464, that any monetary sanction the Alabama court might impose for the debtor’s violations of the charging orders would be non-dischargeable as a debt for willful and malicious injury under 11 U.S.C. § 523(a)(6). Id. at 8–9, citing Summary Judgment Decision at 24–32, 34. The court modified the automatic stay so the Alabama contempt motion could proceed, and entered judgment on 4 February 2026. Id. at 2, 4.

Alabama then delivered the number. On 28 April 2026 the district court granted the sanctions motion, held Campbell in contempt for violating the charging orders, rejected his defences as precluded by the bankruptcy court’s rulings, and held that he must pay Radiance Capital $323,089.00 — the prior money judgment plus accrued interest — to purge the contempt, with further interest running and a fees petition invited. Radiance Cap. Receivables Twelve, LLC v. Campbell, No. 1:13-cv-238-TFM-C, 2026 WL 1147610, at *3–*6 (S.D. Ala. Apr. 28, 2026).

Campbell sought a stay pending appeal. On 1 June 2026, Judge Kyu Y. Paek denied it, finding no likelihood of success, no imminent irreparable injury, and substantial harm to a creditor who had been unpaid for “almost thirteen years” while the charging orders, if followed, “would have resulted in the full payment of the amount owed … many years ago.” In re Campbell, Memorandum Decision of June 1, 2026, at 10 (injury to the other party), and at 6–7, 11 (merits and public interest factors; motion for stay denied).

Put the two holdings side by side and the shape of the law is clear.

A charging order is weak against the interest. It gives the creditor no ownership, no control, and — under many statutes — no lien. The protective value of a well-formed LLC is real, and the case confirms it in the creditor’s own defeat on Count I.

A charging order is strong against the person. It is a court order. Violating it knowingly is not a clever exploitation of a weak remedy; it is contempt, it can be characterised as willful and malicious injury, and under section 523(a)(6) the resulting sanction follows the debtor through bankruptcy and out the other side. Campbell received a discharge in 2024 and still owed the money in 2026.

This is the distinction that clients most often collapse. They hear that a charging order is a weak remedy and conclude that it can be treated as advisory. What it actually means is that the creditor’s rights against the interest are limited. The debtor’s obligations under the order are not limited at all, and the entities themselves are exposed for paying the member in defiance of an order directing otherwise.

There is a corollary for the managers of a charged entity. In Campbell, the LLCs made dozens of payments to the member in violation of the orders. An entity that ignores a charging order is not protecting its member; it is manufacturing evidence of alter-ego and control, and inviting the creditor to escalate from a passive collection right to a contempt proceeding in which someone’s liberty and non-dischargeable liability are on the table.

Nothing about Campbell undermines the charging-order structure. It underlines what makes the structure work:

1. Build before the claim. The orders here landed after judgment. A charging order entered against a properly seasoned structure is a very different problem from one entered against an entity assembled while a lawsuit was pending; the latter invites voidable-transfer and alter-ego attacks in addition to everything else.
2. Let independent management make distribution decisions. The protective power of the remedy comes from the fact that distributions are genuinely discretionary and genuinely decided by someone other than the debtor. A member who can direct distributions to himself is a member who will eventually be accused of doing so.
3. Choose the governing statute deliberately. Exclusivity, whether the order operates as a lien, foreclosure availability, and any sunset provision vary considerably by jurisdiction, and those differences decide cases. Alabama’s charging order is not a security interest; other statutes are drafted differently again.
4. Comply with orders, and litigate the law. Every legitimate argument Campbell had — that a charging order confers no security interest, that his conduct was not fraudulent — was available to him without violating anything. He won on the first of them. He lost everything else because of conduct that no structure can insulate.

Protection is architecture, not defiance. A charging-order structure is a wall built long before the siege, administered by people who are not the debtor, in a jurisdiction whose statute says what it means. A debtor who tries to substitute self-help for architecture ends up where Campbell ended up: discharged in name, liable in fact, and in contempt.

This note is general commentary on published decisions, for information only. It is not legal advice, and charging-order rules, contempt exposure and dischargeability outcomes vary materially by jurisdiction and by the facts of each case.