Bankruptcy and the Construction Sector Part 6
In this six-part article, we have educated you on several of the critical components pertaining to bankruptcy law and the construction sector. In the first, second, and third sections, we discussed the most common ways entities file for bankruptcy. We also discussed how to file a claim to be eligible for compensation during a bankruptcy estate reimbursement. In sections four and five, we discussed some of the obstacles that can impede a construction professional from either seeking payment or terminating their contract.
In this final section, we will discuss how to perfect a mechanic’s lien and some general tips to help guide construction professionals to the best resolution. If an owner has sent you a bankruptcy petition, contact an experienced Jacksonville construction lawyer today.
Perfecting a Mechanic’s Lien
When it comes to the complexities and stress involved in a bankrupt construction project, it’s best to avoid the whole situation by perfecting a timely mechanic’s lien on the property. Secured claims are classified in bankruptcy court as preferred creditors that are compensated first. Having a mechanic’s lien perfected before an owner files for bankruptcy prevents the claim from being classified as unsecured. As we have said before, unsecured claims are only compensated after the preferred creditors are paid. These claims are typically only reimbursed a fraction of their original value.
Abide by the Bankruptcy Court Process
It’s important for construction professionals to remember that once a bankruptcy petition is filed by the debtor the creditor must stop any collection efforts. They also must continue to honor their contract in the meantime and should immediately consult with an attorney for legal advice. An experienced Jacksonville construction attorney can file a petition on the creditor’s behalf and may be able to have the automatic stay removed. Another option is to submit a request to the bankruptcy court demanding to have the debtor either assume or reject the creditor’s executory contract. In addition, employing a knowledgeable attorney ensures that the creditor will meet all their deadlines, including to file a proof of claim, and that the bankruptcy court will be provided with all of the relevant information to potentially improve the creditor’s claim status.
Creating a Favorable Contract
Many bankruptcy cases can be decided in the preconstruction phase when a construction professional agrees to a contract with an owner. By hiring an experienced Jacksonville construction litigation attorney before you put pen to paper, your contract can be closely reviewed and revised to provide you with the most favorable terms. With an experienced attorney reviewing and crafting the written agreement, a construction professional can seek the appropriate protection and potentially maximize their claim in a bankruptcy case.
If you would like to speak with a Jacksonville construction 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.