What Is Your Mechanic’s Lien Worth After A Party Files For Bankruptcy?
| Email This |  Comments |
 Print |
 Trackbacks |
This is a question that is asked frequently by folks who are thinking about filing a lien, or who already have a lien and are worried about the solvency of its debtors. The intersection of bankruptcy law and mechanic’s lien law can be very complicated, as both sets of laws are complex in their own right. Combining these laws together can be a challenge even for lawyers.
Unfortunately, in today’s economic climate, bankruptcy filings are up and mechanic lien rights within bankruptcy is becoming more and more important.
I’ve written about bankruptcy’s effect on a mechanic’s lien in the past on this blog, which you can read through the Bankruptcy tag. I must, however, give a great complement to Michael R. King, an attorney with Gammage & Burnham PLC, who wrote an excellent piece for Construction Executive magazine’s July 2011 feature on construction law.
His article – Lien Rights and the Bankruptcy Code – breaks down some specifics about what a mechanic lien claimant can and should do to enforce its lien rights against a party in bankruptcy. Specifically addressing how you can enforce your lien rights without violating the bankruptcy stay, and how you can position yourself against other creditors by leveraging your lien.
Mr. King’s article does a great job at its mission of explaining how a mechanic’s lien fits within the bankruptcy code, but its not within the article’s scope to discuss how mechanic’s liens help you collect outside the confines of the bankruptcy code. This, however, can sometimes be more important.
If a debtor files bankruptcy, the mechanic’s lien remedy is so terrific because it gives you the opportunity to collect from other parties. You can collect from the party who hired the bankrupt party, for example, and the property owner.
So while there are lots of ways to enforce your lien rights after a bankruptcy filing, sometimes the best way is to look for money from the non-bankrupt parties obligated to you through the lien.
