Maryland asset protection: a charging order the statute calls the exclusive remedy, and then lets a creditor foreclose

Maryland’s LLC statute says, in plain words, that the charging order is the exclusive remedy a creditor has against a member’s interest. Read that and you would put Maryland with the strong protection states, where exclusive-remedy language is exactly what stops a creditor from taking the interest itself. But the same statute, in the same section, authorizes the creditor to foreclose the charged interest and sell it. So the exclusive remedy is not the distributions-only protection the phrase suggests. It is a single procedure that includes foreclosure, and for a single-member LLC the person who buys the interest at that foreclosure sale can end up the sole member of the company.

That gap between what the label says and what the statute does is the thing to understand about Maryland protection, because an advisor who reads exclusive remedy and stops there will misjudge the state. The rest of the picture runs the other way and is genuinely strong: Maryland’s veil is one of the hardest in the country to pierce. So the protection is lopsided, strong around the company and softer around your interest in it, and the plan follows from that asymmetry. Take the charging order first.

The charging order that is exclusive and foreclosable at once

Start with what a personal creditor gets against your Maryland LLC stake. The general mechanics are on the charging order protection page. Maryland’s version rewards careful reading.

Maryland calls the charging order the exclusive remedy, but the same section lets a creditor foreclose the charged interest, so exclusive describes the method, not a bar on foreclosure.

Under Md. Code, Corps. & Ass’ns 4A-607, a charging order is a lien on the debtor-member’s economic interest and requires the LLC to pay the creditor only the distributions the member would have received. Subsection (f) then says this section is the exclusive remedy by which a creditor may reach the interest. The trap is that subsections (c) and (d) of the same section authorize foreclosure of the charged interest, with a right to redeem it before the sale. So the exclusive-remedy language means the creditor must proceed through 4A-607, and 4A-607 includes foreclosure. That is the opposite of Wyoming or Nevada, where exclusive-remedy language exists precisely to bar foreclosure. In Maryland the phrase does not protect the interest from being sold; it only channels how.

The single-member case is where this bites hardest.

The buyer at a Maryland foreclosure sale takes the interest and can become a member, so in a single-member LLC that buyer can become the sole member and control the company.

The purchaser at the foreclosure sale receives the rights of an assignee and, under the assignment provisions in 4A-603 and 4A-604, can be admitted as a member in some circumstances. In a single-member LLC there are no other members to withhold consent, so the foreclosure buyer can step in as the sole member and take control of the company and its assets. The redemption right is the mitigant: before the sale, the debtor, the other members, or the LLC itself with member consent can buy back the charged interest. But redemption takes money the debtor by definition may not have, and for a sole owner there are no other members to fund it. The single-member LLC page covers that soft spot generally; in Maryland it is written into the statute.

The veil that almost never comes down

Where the charging order is soft, the veil is among the strongest in the country.

Maryland pierces the veil only to prevent fraud or enforce a paramount equity, and no reported case has ever succeeded on the paramount-equity ground alone.

Under Bart Arconti & Sons, Inc. v. Ames-Ennis, Inc., the standard is that owners are not liable for a company’s debts except where necessary to prevent fraud or enforce a paramount equity. Maryland courts have read that so narrowly that, as the Court of Appeals noted in Residential Warranty v. Bancroft Homes, arguments to pierce for reasons other than fraud have failed, and no Maryland case has ever found a paramount equity worth enforcing. In Serio v. Baystate Properties, applied to an LLC, the court refused to pierce absent fraud. Undercapitalization alone does not do it here, and neither does failure to observe formalities; even the Bart Arconti facts, common control, shared offices, and commingled equipment, were not enough without fraud. That makes Maryland’s ordinary shield very hard to break, the mirror image of a state like Missouri where thin capital alone can pierce. The piercing the veil page covers the doctrine; the Maryland lesson is that the wall around the company is high, so the effort in a Maryland plan belongs elsewhere.

There is one limit worth stating plainly, so the strength is not overread.

A strong veil does not shield a member from liability for the member’s own torts, which Maryland enforces directly.

In Allen v. Dackman, the Maryland high court held that an LLC member can be personally liable for his own negligence despite the LLC. The veil protects you from the company’s contract and debt obligations; it does not turn your own wrongful act into the company’s. So a member who personally commits a tort, signs a personal guaranty, or acts outside the entity is exposed regardless of how hard the veil is to pierce. The strong veil is real, but it protects against derivative liability for the entity’s obligations, not against liability you incur yourself.

Two homesteads, and only one exists outside bankruptcy

Maryland’s homestead is unusual, and it does not carry the load against an ordinary judgment.

Maryland’s homestead exemption works only in bankruptcy, so against an ordinary money judgment a homeowner has almost no homestead protection at all.

The homestead exemption in Md. Code, Cts. & Jud. Proc. 11-504(f) protects about $31,575 of home equity, keyed to the federal bankruptcy figure and adjusted every three years, and it does not double for a married couple. The catch is that it can be claimed only in a bankruptcy filing. Outside bankruptcy, when a judgment creditor levies on a home, Maryland offers only a $6,000 exemption of any property, so a homeowner facing an ordinary judgment has essentially no homestead to stand on unless and until they file bankruptcy. That is a genuinely weak position for the home, and it means the protection for a residence cannot rest on the homestead the way it can in a big-exemption state. Confirm the current figure before relying on it, because the amount adjusts and reform has been proposed.

The entireties that do the real work

For a married couple, Maryland’s home protection comes from titling.

Maryland recognizes tenancy by the entireties, so a home held that way is beyond a creditor of only one spouse, and it can be preserved in a trust.

Property held as tenancy by the entireties in Maryland is exempt from the claims of a creditor of only one spouse, though not from a joint debt, and Maryland allows a couple to keep that immunity when the property is transferred into a qualifying trust. Because the homestead is bankruptcy-only and thin, entireties is what actually protects a married couple’s home against one spouse’s creditor, and it reaches beyond real estate into other property held that way. The full doctrine, including the joint-debt exception and the federal-tax-lien rule under United States v. Craft, is on the entireties page. The courts page explains why where a judgment is enforced can matter as much as the law on the books.

The bottom line

Maryland’s charging order is called the exclusive remedy under Corps. & Ass’ns 4A-607, but the same section authorizes foreclosure of the interest, so the label does not bar a sale.

For a single-member LLC the foreclosure buyer can become the sole member, which makes the sole-owner Maryland LLC genuinely exposed despite the exclusive-remedy language.

The veil is one of the hardest in the country to pierce, requiring fraud, because the paramount-equity ground has never succeeded and undercapitalization alone does not suffice.

That strength has a limit: a member remains personally liable for the member’s own torts under Allen v. Dackman.

The homestead works only in bankruptcy and is modest, so a married couple’s home is protected by tenancy by the entireties, which means the plan here is multiple members or holding layers for the interest, entireties for the home, and no over-reliance on the exclusive-remedy label.

What this page does not cover

This page is about how creditors reach you in Maryland. What Maryland’s law lets your operating agreement do, and the duties the statute leaves to common law, are on the governance page. Maryland’s high income and capital-gains taxes, the transfer taxes on moving property, and the absence of a series LLC are on the structure and cost page. The $100 formation fee and the $300 annual report every LLC owes are on the filing page.

Last verified August 2026.