Sometimes, the financial difficulty of the party with whom you contracted, or even their bankruptcy, can be the reason why you are not receiving payment. In that situation it may seem like nothing can get you paid – if there’s no money left at all, how can you get what’s due to you? That’s not necessarily true, however. Filing a mechanics lien opens up many other avenues to get you paid, including giving you the ability to get paid by forcing a sale of the property your work improved and paying you your share. This is part of a 17-Part Series on How Mechanic Liens Work To Get You Paid.
Bankruptcy Isn’t The End, It’s Just The Beginning
A mechanics lien is a secured debt, putting the lienholder in a good position when concerning bankruptcy. Bankruptcy is an unfortunate reality in the construction world. And, even when the financial stress on a party that owes money isn’t enough to force a bankruptcy filing, it can result in the prioritization of payments that may leave many parties who are due money out in the cold waiting for a payment that may never come. Many times, the structure of construction payment causes the parties involved to struggle to pay everybody they need to. Thankfully, there are options for those unpaid parties. One of the best options is, of course, filing a mechanics lien. Mechanics liens give construction industry participants the right to recover from more than just the owner and other contractors. As a lienholder, you have a right to force a foreclosure sale the property itself and get paid from the proceeds.
Going Once, Going Twice, SOLD!
If you are unable to find success in recovering directly from the party that owes you money because there is just no money to be had, a mechanics lien claimant can file a lien enforcement action (foreclosure action) to force the sale of the property in order to pay the secured creditors. When you file a mechanics lien, you are securing a debt owed to you and taking the property you worked on and/or furnished materials to as collateral. While this is an extremely powerful aspect of how mechanics liens work to get you paid, rarely does the situation get to the point where the property itself must be sold off.
The Moral of the Story
Filing a mechanics lien gets you paid, even in the face of bankruptcy or other significant financial distress of the party who owes you money. By giving you the ability to procure payment from a forced sale of the property itself, mechanics liens provide significant leverage to make sure you never go unpaid on a construction project.
Other Ways A Mechanics Lien Works To Get You Paid
There ability to recover payment through a foreclosure action is not the only feature of mechanics liens that work to get claimants paid, however. There are many other reasons mechanics liens have that effect, many of which can be found in the Free Guide to the 17 Ways A Mechanics Lien Works To Get You Paid. The full list of these mechanics lien effects are as follows:
- A mechanics lien encumbers the property
- A mechanics lien gets the lenders attention
- A mechanics lien gets the owners attention
- When mechanics liens are filed they cause contracts to get breached
- More parties become obligated to your debt
- A mechanics lien sets a firm deadline
- You can always fall back on the property for payment if you filed a mechanics lien
- People will pay you to avoid dealing with the mechanics lien
- Mechanics liens are hard to challenge
- Mechanics lien claims help when parties file for bankruptcy protection
- Mechanics lien will effectively freeze money flow on a project
- Mechanics lien claims may force parties into favorable joint check agreements
- Lien claims may entitle you to attorney fees and other costs
- Mechanic liens escalate the situation and prioritize your debt
- Mechanics lien claims may affect a contractor’s bonding ability
- Lien claims affect relationships
- Mechanics liens creative leverage