Kentucky asset protection: an exclusive-remedy charging order that still allows foreclosure, and a single-member gap that lets the buyer take the company

Kentucky looks strong on paper and is softer underneath. Its charging-order statute calls the charging order the exclusive remedy, the language that in the best states shuts a creditor out of everything but waiting for distributions. But the same statute lets a court foreclose on the membership interest, and for a single-member LLC the foreclosure buyer can dissociate the owner and elect himself the sole member, taking the whole company. So the exclusive-remedy label does less work in Kentucky than the word suggests, especially for a sole owner.

The home has its own soft spots. Kentucky’s creditor homestead is only $5,000, one of the lowest in the country, and it is a different thing from the $49,100 figure people find online, which is a property-tax break for older and disabled homeowners, not creditor protection. What actually protects a Kentucky married couple’s home is tenancy by the entireties, and even that has a wrinkle a creditor can exploit. Take the charging order first, because the single-member gap is the one most Kentucky owners do not see.

The charging order that still allows foreclosure

Start with what a personal creditor gets against your Kentucky LLC stake. The general mechanics are on the charging order protection page. Kentucky’s version is exclusive in name but not airtight.

Kentucky calls the charging order the exclusive remedy, but the same statute lets a court foreclose on the membership interest.

Under KRS 275.260, the charging order is described as the exclusive remedy by which a member’s judgment creditor may satisfy the judgment, which sounds like the strong protection Oklahoma and Wyoming provide. But subsection 4 of the same statute lets a court order foreclosure on the interest, forcing a sale of the debtor member’s membership interest, and while Kentucky courts have rarely used that power, it exists. So Kentucky is not a pure charging-order state where a creditor can only collect distributions. It is a state where foreclosure is on the table, which matters most in the single-member case.

On foreclosure of a single-member LLC, the owner is dissociated and the buyer can elect himself the sole member, taking the entire company.

Here Kentucky splits sharply between multi-member and single-member LLCs. In a multi-member LLC, a foreclosure buyer takes only the assignee’s economic rights, not management control, and the debtor member is not even removed without the written consent of a majority-in-interest of the other members, so the company stays with its remaining owners. But in a single-member LLC, on the assignment of the entire interest the sole member is dissociated, and the purchaser may then elect himself the sole member. That is the whole company, gone to the creditor’s buyer. The single-member LLC page covers the general weakness; in Kentucky it is concrete, because the statute that governs foreclosure and dissociation lets the buyer step into the sole owner’s shoes. A multi-member Kentucky LLC is meaningfully safer, and for anything worth protecting, a real second member is not optional here.

The home, the homestead, and the number that misleads

On the residence, the first thing is to correct a number.

Kentucky’s homestead against creditors is only $5,000, not the $49,100 figure that appears online, which is a property-tax break.

Under KRS 427.060, the Kentucky homestead exemption protects a debtor’s interest in a permanent residence up to just $5,000 in value from execution, attachment, and judgment, except for a mortgage or purchase-money debt. That is among the lowest creditor homesteads in the country, and it protects almost no equity in a real home. The much larger $49,100 figure that dominates search results is the property-tax homestead exemption for homeowners 65 or older or totally disabled, which reduces the assessed value for property-tax purposes. It is a tax break, not a shield against creditors, and confusing the two leaves a homeowner thinking the residence is protected when the creditor exemption stops at $5,000.

What carries the marital home in Kentucky is entireties ownership, and it comes with a catch.

Kentucky recognizes tenancy by the entireties, which protects the home from one spouse’s creditor, but the creditor can still attach that spouse’s survivorship interest.

Kentucky recognizes tenancy by the entireties in real property, so a married couple’s home is protected from a creditor of only one spouse: as long as the non-debtor spouse is alive, the creditor cannot force a sale of the land. That is real protection, and with the homestead so low, it is the main thing standing between a Kentucky couple’s home and a one-spouse creditor. The wrinkle is that Kentucky lets the creditor attach and execute upon the debtor spouse’s contingent survivorship interest. Selling that contingent interest does not disturb the couple’s present possession, but if the non-debtor spouse dies first, the creditor’s buyer can take the property, so the protection depends on the order of deaths. A joint creditor of both spouses can reach the property regardless. The entireties page covers the doctrine; the Kentucky point is that entireties is the home’s real defense here, and its survivorship wrinkle is worth planning around rather than discovering later.

The veil, and a warning hidden in the leading case

To reach an owner directly, a creditor uses Kentucky’s two-part test.

Kentucky pierces the veil where an owner’s domination erases the entity’s separateness and respecting the entity would sanction fraud or promote injustice beyond mere non-collection.

Under Inter-Tel Technologies, Inc. v. Linn Station Properties, LLC, a Kentucky creditor must show both a domination so complete that the entity lost its separate existence and circumstances where continued recognition of the entity would sanction fraud or promote injustice, and the court was careful to say the injustice must be some wrong beyond the creditor’s mere inability to collect. Fraud is not required, injustice suffices, and the most important facts are grossly inadequate capitalization, egregious disregard of formalities, and a high degree of control. Kentucky will also pierce up through tiers, reaching a grandparent holding company, and a member is personally liable for his own torts regardless of the veil.

The bottom line

Kentucky calls the charging order the exclusive remedy under KRS 275.260, but the same statute lets a court foreclose on the interest, so it is not a pure charging-order state.

For a single-member LLC, foreclosure dissociates the owner and lets the buyer become the sole member, so a sole-owner Kentucky LLC can be taken outright and a real second member matters.

The creditor homestead is only $5,000, not the $49,100 property-tax figure, so the residence’s real protection comes from tenancy by the entireties, not the homestead.

Entireties protects the home from a creditor of one spouse while the non-debtor spouse lives, but the creditor can attach the debtor spouse’s survivorship interest, so the protection turns on survivorship.

The veil is pierced on domination plus fraud or injustice beyond non-collection, and the leading case’s language treating entities-for-tax-and-liability as suspect is a reason to keep every entity genuinely capitalized and separate.

What this page does not cover

This page is about how creditors reach you in Kentucky. What Kentucky’s law lets your operating agreement do, and the duties it will not soften without a writing, are on the governance page. Kentucky’s flat income tax, the entity-level LLET even a disregarded LLC pays, the local net-profits taxes, and the lack of a series LLC are on the structure and cost page. The $40 formation fee, the $15 annual report, and the separate LLET filing are on the filing page.

Last verified August 2026.