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How to Secure Payment When There Is Bankruptcy on a Construction Project Part 3

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Bankruptcy can be a like a brick wall separating contractors and suppliers from payments on the work and materials they faithfully provided. Fortunately, there is a way that payments can be secured when dealing with bankruptcy on a construction project. If you are just joining us for this series, in part one we discussed why the construction industry is so prone to bankruptcy. We followed that up in part two by describing the devastating ripple effect that a bankruptcy can have on a project. Now, a Charlotte construction lien attorney at Cotney Construction Law will be describing the mechanic’s lien.

Filing a mechanic’s lien is often the only thing that a contractor or subcontractor can do to ensure that they receive payment on a stalled project. As we begin to discuss mechanic’s lien law, please keep in mind that this is an incredibly complex process. With laws and deadlines that must be adhered to and which vary from state to state, it is imperative that you partner with a Charlotte mechanic’s lien attorney when going through the lien process. Doing so could be the difference between receiving payment and succumbing to bankruptcy.  

Much Needed Leverage: The Mechanic’s Lien

A mechanic’s lien is essentially a claim that links unpaid funds with a property, making owners and future owners of a property responsible for the lien amount. This makes it nearly impossible for a property to be refinanced or sold until the lien is paid off, and it provides a contractor with the leverage needed to reclaim unpaid compensation.

When an owner or other entity files for bankruptcy they become protected by what is called an “automatic stay.” This stops other parties from collecting on debts and is meant to allow an owner the chance to regroup before having to repay their debts. Fortunately, lien laws generally allow for mechanic’s liens to be filed and perfected during an automatic stay.     

The above sounds encouraging for contractors, subcontractors, and suppliers seeking to secure payment. And indeed it is; however, state laws can dramatically impact and limit the effectiveness and reach of a mechanic’s lien. This is especially true in North Carolina, where complicated lien laws can prove to be a substantial hurdle for subcontractors.

As we reach the conclusion of this series in part four, we will be detailing how to file a mechanic’s lien. We can not stress enough how important it is that you partner with an experienced Charlotte construction lien attorney when attempting to file a mechanic’s lien. Even an honest mistake can invalidate a lien. Don’t leave anything to chance when battling for payments owed to you.

If you would like to speak with a Charlotte mechanics lien attorney, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.