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Can a contractor file while homeowner is in bankruptcy? Thank you.

Thank You. My house burned down 06.09.2017. New Home Rebuild Contract completion date 12.29.2017 House not completed. No water, gas hookup, defective electric, no driveway, heating, plumbing, no hardware in bathroom or kitchen, no pellet stove or stovepipe, etc. Contractor quit 04.12.2018 over dispute over cabinets that were second-hand. They have been paid all but approximately $30,000 for a completed house. Now they want that plus another $20,000. I have not received the money from the bank yet. So I couldn’t have paid even if I wanted to. They filed lien paperwork July 2019. I was in active bankruptcy until June 2019. Is this legal to file a lien after over a year? Thank You. Judye Bell.

1 reply

Jul 28, 2019

That's a great, and very complex, question. There are many many issues at play when mechanics lien and bankruptcy law collide. We have written about mechanics liens in the face of bankruptcy filings before, and even published an "indispensable guide" to provide a lot more in-depth information.

A mechanics lien may allowed to be perfected during a bankruptcy proceeding, if it arose prior to the bankruptcy filing. Usually, mechanics liens "relate back" attach to the property at the beginning of the work as a whole, so if the bankruptcy wasn't already filed when the work began, the lien may be able to be filed. However, a mechanics lien may not necessarily be enforced during the automatic stay of a bankruptcy proceeding. The enforcement of the lien must be "tolled" so that the lien could be enforced after the bankruptcy has concluded (since a mechanics lien cannot be stripped from the property by filing bankruptcy).

Note, however, that there are still time periods and deadlines that apply. In California a GC must file a mechanics lien within 90 days from the completion of the project. In California, completion is defined as: "(1) Actual completion of the work of improvement. (2) Occupation or use by the owner accompanied by cessation of labor. (3) Cessation of labor for a continuous period of 60 days. (4) Recordation of a notice of cessation after cessation of labor for a continuous period of 30 days."

Accordingly, if the work stopped for at least 60 days, and then a lien wasn't filed within the next 90 days, the lien is too late. Liens filed after the deadline in California are invalid and unenforceable.

There are many moving parts here, so it is likely a good idea for you to talk to a local attorney who can review all of the pertinent facts.

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