What the General Assembly Deleted.
August 2026
Twenty years ago, Virginia’s limited liability company statute let a court foreclose on a judgment debtor’s LLC interest. In 2006 the General Assembly took that language out. On April 21, 2026, the Court of Appeals of Virginia was asked to put it back — by a creditor with an unusually sympathetic claim — and declined. Vaughn v. Farhat, Record No. 0162-25-2 (Va. Ct. App. Apr. 21, 2026) (published) (Malveaux, J.), appeal from the Circuit Court of Westmoreland County.
Vaughn v. Farhat is a short published opinion about a single word that is no longer in a statute. It is also one of the cleanest recent illustrations of something we say often and clients rarely believe until they see it litigated: the charging order’s strength is not a property of LLCs. It is a property of a particular legislature’s text, in a particular state, on a particular date. Change the state, or change the session, and the protection changes with it.
The facts, which do not favor the debtor.
Robert L. Vaughn, Jr. hired Isam Farhat as a contractor for residential construction. Vaughn paid over a million dollars. The work was not completed. Vaughn then discovered that Farhat lacked proper licensing and had misrepresented material orders.
The Circuit Court of Westmoreland County found Farhat liable for fraud and entered judgment for approximately $6.35 million — a figure that includes treble damages under Virginia’s Consumer Protection Act, Va. Code § 59.1-204(A), and an award of punitive damages.
Vaughn then went to collect. He applied for a charging order under Va. Code § 13.1-1041.1, asking the circuit court both to impose liens on Farhat’s interests in several single-member limited liability companies and to foreclose on those interests. The circuit court entered the charging order and refused the foreclosure. Vaughn appealed.
Pause on the posture, because it matters to how much weight the holding can bear. This is not a case where a well-advised planner defeated an ordinary commercial creditor through elegant structure. This is a defrauded homeowner, holding a fraud judgment with punitive damages, running into a statute that says what it says. Courts do not enjoy that outcome, and the opinion does not pretend otherwise.
The holding: the text controls.
The Court of Appeals, in an opinion by Judge Malveaux, affirmed.
The reasoning rests on plain language and legislative history. Va. Code § 13.1-1041.1 provides that entry of a charging order is the exclusive remedy by which a judgment creditor of a member may satisfy a judgment out of the judgment debtor’s transferable interest; see also Va. Code § 13.1-1038 (defining “transferable interest”). What the creditor gets is defined and bounded: the right to receive the distributions that the judgment debtor would otherwise have been entitled to receive. Not the interest itself. Not management rights. Not a sale.
The decisive point is historical. Virginia’s statute once authorized foreclosure; the General Assembly removed that authorization in 2006. The court held that it could not reinstate by construction a remedy the legislature had deliberately deleted — to grant foreclosure would be to rewrite the statute, not interpret it. The court also noted that Vaughn may have other means of satisfying his judgment under other provisions of Virginia law; the charging order simply is not one of them, beyond the distribution stream.
The single-member point, and why it is the interesting one.
Vaughn’s strongest policy argument was the obvious one: Farhat’s LLCs were single-member entities. The traditional justification for the charging order — protecting innocent co-members from being saddled with a stranger as a partner — has no application where there are no co-members. A debtor who can park assets in a wholly owned LLC and hand his creditor nothing but a lien on distributions he controls has a shield the original rationale never contemplated.
That argument has won elsewhere. Florida’s Supreme Court held in Olmstead v. Federal Trade Commission, 44 So. 3d 76 (Fla. 2010), that the charging order was not the exclusive remedy as to a single-member LLC interest under then-governing Florida law, allowing the creditor to reach the interest itself; Florida subsequently amended its LLC act in response. A Colorado bankruptcy court reached a comparable result in In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003), where the debtor was the sole member. Both decisions leaned heavily on the absence of co-members.
Virginia’s court did not take that road. It held that the statute applies alike to single-member and multi-member LLCs, and rejected the anti-shielding argument as a matter for the legislature. The General Assembly wrote a rule without a member-count qualifier; the court applied the rule without one.
This is the whole tension in the field, presented in miniature. Two respectable appellate courts, faced with materially similar structures and materially similar equities, reach opposite results — because their statutes differ, and because their judiciaries differ in appetite for reading purpose into text. Neither answer is “the law of charging orders.” Each is the law of one state.
What planners should take from this — and what they should not.
Do not read Vaughn as a recommendation. The temptation, on seeing a fraud judgment stopped at the charging-order wall, is to conclude that a Virginia single-member LLC is a good place to keep assets. That conclusion does not follow, for several reasons.
First, the court expressly reserved the possibility of other remedies. A creditor with a fraud judgment has a well-stocked toolkit that does not depend on § 13.1-1041.1 at all: fraudulent-transfer and voidable-transaction claims to unwind whatever funded the LLCs; reverse veil-piercing and alter-ego theories in jurisdictions that entertain them; discovery in aid of execution; and, if the debtor is pushed there, an involuntary bankruptcy in which a trustee’s powers are considerably broader than a state-court creditor’s. The charging order limits one avenue. It does not close the others.
Second, and more fundamentally, a charging order is a strong defense only when the distributions never need to come out. If the debtor’s LLC is the source of his living expenses, a charging-order lien on distributions is a functioning tourniquet, not a formality. It is protective precisely to the degree the client can afford to let the entity sit idle — which is a real strategic asset, but a different one from immunity.
Third, and this is the point we would underline hardest: a protection created by statute can be removed by statute. Virginia’s foreclosure remedy existed until a 2006 session removed it. Nothing prevents a future session from restoring it, and nothing prevented Florida’s court from reading its statute narrowly in the first place. A plan whose entire load-bearing element is one sentence in one state’s LLC act is a plan with a single point of failure, subject to revision by people the client has never met.
Where architecture beats jurisdiction-shopping.
The recurring Lighthouse themes apply here in a specific way.
The charging order is best understood as one layer, not a structure. Its proper role is to make a creditor’s recovery slow, uncertain, and economically unattractive at the entity level — while the questions that actually determine outcomes are answered somewhere else: Who owns the interest? When did they come to own it? Who administers it? Can the debtor compel a distribution?
A charging-order LLC held personally by the debtor is exposed on all four questions. The same LLC held by a seasoned, irrevocable, discretionary trust under independent administration is exposed on none of them, because the debtor no longer owns the interest that the charging order would attach to, and no longer controls the tap the creditor is waiting at. The charging order then becomes what it should be — a second wall behind the first — rather than the only thing standing between a client and a judgment.
Jurisdiction still matters, and matters a great deal; some legislatures have written far more robust charging-order provisions than Virginia’s, including express statements that the charge is not a lien, that distributions are reachable only as and when actually made, and that the order itself expires. But jurisdiction is a choice made inside an architecture, not a substitute for one.
Conclusion.
Vaughn v. Farhat will be cited as a debtor-favorable decision, and on its facts it is. We would file it differently. It is a decision about the fragility of protection that depends on a single legislative sentence — a sentence that existed in one form until 2006, exists in another form now, and produces the opposite result four hundred miles south in Florida.
Mr. Farhat’s interests survived this proceeding. What survived was not a plan; it was a statute he happened to be standing behind, and a creditor who asked for the one remedy the General Assembly had already taken off the table. The next creditor will ask for something else.
Clients who want protection that does not turn on which remedy the other side happens to request should be building something with more than one wall in it, years before anyone is at the gate. The statute is the last line of defense. It should never be the first.
This note is general commentary for informational purposes and is not legal advice for any specific matter. Charging-order law varies materially among the states, and the availability of any remedy turns on the facts, the timing, and the governing jurisdiction.