Michigan asset protection: a charging order that bars foreclosure, and the one creditor its entireties shield cannot stop

Florida handed a creditor an entire single-member LLC in the Olmstead case in 2010. Michigan watched, and within months rewrote its statute so the same thing could not happen here. The Michigan charging order is now the exclusive remedy against a member’s interest, and the statute bars a creditor from foreclosing on that interest “under this act or any other law.” That is genuinely strong protection, closer to Wyoming than to most of Michigan’s neighbors, and it is the opposite of Pennsylvania, where the charging order is exclusive in name but foreclosable in fact.

The strength is real. So are two holes, and both are the honest kind that a Michigan owner needs to hear before relying on any of it. The statute never mentions the single member, so whether its no-foreclosure promise reaches a one-owner LLC has never been tested. And Michigan’s other great shield, tenancy by the entireties, has one creditor it cannot stop, established in a Michigan case that went all the way to the United States Supreme Court.

The charging order bars foreclosure, by statute

Start with what a personal creditor gets when they come after your Michigan LLC stake. The general mechanics are on the charging order protection page. Here is what Michigan’s statute adds.

Michigan’s charging order is the creditor’s only remedy, and the statute forbids foreclosure on the interest under this act or any other law.

MCL 450.4507 gives a judgment creditor a charging order, a lien that captures the distributions the debtor would have received, and stops there. Subsection (4) says the creditor does not become a member and the debtor keeps every membership right except the charged distributions. Subsection (5) makes the charging order a lien but then says a person “may not foreclose on that lien or on the membership interest under this act or any other law.” Subsection (6) calls the charging order the exclusive remedy and shuts down the side tools, the order for an accounting, an inquiry, or company action that weaker statutes hand a frustrated creditor. Foreclosure barred, receiver-style relief barred, exclusive remedy stated. That is the strong version of the doctrine.

There is a clean story behind the strength. The exclusivity and the no-foreclosure language came from a 2010 amendment passed in direct response to Florida’s Olmstead decision, where a state supreme court read a silent statute to let a creditor seize a single-member LLC outright. Michigan’s legislature closed that door before a Michigan court could open it. The rule and the reason it exists are one narrative: another state’s creditor won, and Michigan amended the statute so its own creditors could not.

The single-member question the statute left open

Here is the first hole, and it sits inside the strength.

Michigan’s statute never names the sole member, so its no-foreclosure protection for a single-member LLC is strong on its face and untested in court.

Wyoming wrote single-member protection into the text of its statute, naming the sole member so no court could read silence against a one-owner company. Michigan did not. MCL 450.4507 bars foreclosure broadly, “under this act or any other law,” but it says nothing specifically about the single member, and no Michigan decision has yet confirmed that the bar holds when there are no other members for the charging-order limit to protect. The whole rationale for limiting a creditor to a charging order is to avoid disrupting the other members. In a one-owner LLC there are no other members, which is exactly the reasoning that sank single-member protection in Florida and elsewhere. The single-member LLC page treats this as the general soft spot of the form.

Piercing the veil

The second attack ignores the company and reaches the owner directly. The general doctrine is on the piercing the veil page. Michigan’s version is judge-made and fact-driven.

Michigan pierces on the entire spectrum of relevant facts, and a creditor does not have to prove fraud to get there.

The leading case is Foodland Distributors v. Al-Naimi (220 Mich App 453, 1996), which tells courts to weigh “the entire spectrum of relevant facts” and holds that “there is no single rule delineating when the corporate entity may be disregarded.” The working test asks whether the company was a mere instrumentality of the owner, used to commit a wrong, causing an unjust loss to the plaintiff. Michigan courts apply the same doctrine to LLCs as to corporations, and they have held it is error to require proof of fraud, so undercapitalization and commingling can carry a piercing claim on their own. The site’s standing point holds here as everywhere: clean separateness between you and the company, not ceremony, is what keeps the veil intact.

The entireties shield, and the creditor it does not stop

The LLC is one layer. For a married Michigan couple, the more powerful shield is often how they hold their real estate.

Michigan exempts 100% of real property that spouses hold as tenants by the entireties from the creditors of either spouse alone.

Under MCL 600.5451(1)(n), real property held by a married couple as tenants by the entireties is fully exempt from the creditors of one spouse, and Michigan applies this broadly. It is not capped at a home. It covers all entireties real property, commercial buildings and raw land included, which makes it far more powerful than the state’s modest homestead exemption. Michigan presumes that real estate a married couple holds jointly is held by the entireties. The trusts and LLCs page covers the estate-planning side of holding property this way.

Two limits define the protection. It is real property only. Unlike Pennsylvania, which extends entireties to bank accounts and even a membership interest, Michigan’s entireties doctrine is a real-estate tool, so do not expect it to shield your accounts or your LLC stake. And it protects only against a creditor of one spouse. The moment both spouses are liable on the same debt, common in business where lenders want both signatures, the shield is gone, and it ends on divorce or the death of a spouse.

Then there is the hole that makes this page worth reading, and it is pure Michigan.

The one creditor Michigan’s entireties shield cannot stop is the IRS, and the case that settled it was a Michigan case in the United States Supreme Court.

In United States v. Craft (535 U.S. 274, 2002), a husband owed federal income tax, and a federal tax lien attached to “all property and rights to property” he held. He and his wife owned Michigan real estate as tenants by the entireties, which Michigan law insulates from a creditor of one spouse. The Supreme Court held the federal lien attached anyway, because federal law, not Michigan law, defines what counts as the taxpayer’s “property” for a federal tax lien, and the husband’s bundle of entireties rights was enough. A married Michigan couple can shield their real estate from an ordinary creditor of one spouse and still lose it to that spouse’s federal tax debt. This is the seam a state-law asset-protection plan misses from the inside: the strongest state shield in Michigan has a federal exception written into it by the nation’s highest court, in a case that arose here.

Beyond entireties: the modest homestead and the opt-in choice

For an unmarried owner, or a couple that has co-signed the business’s debts, the entireties shield does nothing, and Michigan’s other exemptions are thin.

Michigan’s homestead exemption is a modest, inflation-adjusted cap, so a married couple’s real protection is entireties, not the homestead.

The state homestead exemption under MCL 600.5451(1)(m) is a capped, inflation-adjusted figure, adjusted periodically, and the published amounts vary, so confirm the current number with the state before relying on it. What matters structurally is that the cap is small next to the value of most homes, which is why the married-couple protection in Michigan runs through the entireties exemption rather than the homestead line. Michigan is an opt-in state for bankruptcy, meaning a filer chooses either the Michigan exemption set or the federal bankruptcy exemptions, not a mix, and the entireties question usually drives the choice. Michigan also has no domestic asset protection trust statute, so the self-settled trust that a Wyoming or Nevada resident can use to shield assets from future creditors is not available at home. The courts page explains why where a judgment is enforced, not just where the law is strong, decides who wins.

The bottom line

Michigan’s charging order is the exclusive remedy and bars foreclosure on the interest by statute, a 2010 answer to Florida’s Olmstead, which makes it one of the stronger LLC statutes in the country.

The statute never names the sole member, so single-member protection is strong on its face but untested, and a real second member is the way to remove the doubt.

Veil piercing runs on the entire spectrum of relevant facts under Foodland, and a creditor need not prove fraud, so separateness discipline is the real defense.

Tenancy by the entireties exempts 100% of a married couple’s real property from one spouse’s creditor, but it covers real estate only, not accounts or an LLC interest, and it fails on joint debt or divorce.

The IRS is the creditor the entireties shield cannot stop, settled in United States v. Craft, a Michigan case, so a federal tax lien reaches entireties property despite state law.

Protection in Michigan is genuinely strong for the married couple with real estate and no joint debt, and thin for everyone else, which makes structure and titling the decision, not the statute alone.

What this page does not cover

This page is about how creditors reach you in Michigan. What Michigan’s law lets your operating agreement do, and the minority-member rights it will not let you draft away, is on the governance page. Where the entity lives, why Michigan has no series LLC, and the property-tax uncapping that hits when an entity changes hands are on the structure and cost page. Fees, forms, the February 15 annual statement, and deadlines are on the filing page.

Last verified August 2026.