New Mexico LLC membership assignment - Personal LLC member judgment

What if I get a personal judgment against me as a member?

One of the benefits of the New Mexico LLC is the asset protection it allows the LLC from the members and managers as well as the preservation of assets inside the LLC, to protect the LLC from the members and managers personal problems.

The standard LLC operating agreement and articles of organization will not protect the LLC from its members to the fullest extent available under the New Mexico LLC law. Our custom drafted New Mexico LLC articles of organization and New Mexico LLC operating agreement are specifically drafted to protect you as much as possible within the law.

If you get a judgment against you personally and you own a membership interest in a New Mexico LLC, the creditor will try to compel the Court to award it your membership interests.

Section 53-19-32 of the New Mexico Statutes states a few things of interest:

A membership interest is assignable.
A creditor that wins a Court judgment on a member of the New Mexico LLC and the Court approves an assignment of that member's interest does not automatically make the creditor a member.
An assignment entitles the assignee only to the distributions that may have come to that member's membership interests.
A lien, security interest, or other encumbrance against a member is not an assignment! This means that just because the member may personally have all kinds of judgments against the member, a Court would have to specifically award the members creditors an assignment of membership interests.

Section 53-19-33 discusses the rights of an assignee to become a member:

The Creditor that wins an assignment of member interests from a Court may not become a member unless all members unanimously consent
There are provisions allowing the assignee to be liable for any agreements a member has to continually fund the LLC. This may be a bargaining point, because the member is not required to turn over membership in the LLC. If you are bound to continually fund your New Mexico LLC every year with money, the creditor may not want to take over the member interests. The downside of this would be that you would have it in writing that you would fund the New Mexico LLC according to your agreement, creating more of a set of rules for you to keep up with.

Section 53-19-35 discusses the rights of a judgment creditor of a member:

The court may charge the interest of the member with payment of the amount of the judgment, with interest. It limits the rights The judgment creditor's only rights are the same as an assignee of the member's interest.

Basically, you're pretty well covered. The only LLC with better Statutes is Wyoming. The thing that is missing from New Mexico law is hammering down a few more specific details. The thing that is great about Wyoming LLC law is that it specifically states that the "ONLY" remedy of a creditor is to get a Court to award a judgment against the member's distributions. New Mexico does not specifically state this, so some could argue that someday a Court could interpret these laws differently and pierce the corporate veil in an extreme fraudulent case. In written laws, the more specific they are, the less room for random interpretations there are. Overall, the New Mexico LLC is a little cheaper on an annual basis, and a little more private than the Wyoming LLC, and has REALLY good asset protection laws that govern it.