Cook County, Illinois: We did a roof job for a homeowner and he is unable to pay now. He is currently in Ch. 13 bankruptcy. Can we still file a mechanics lien here? Thank you in advance! -Joe
According to your question, you have not yet recorded your Notice of Mechanics Lien, and the property Owner has filed Bankruptcy. Here is what you need to know:
As you know, the first step in "perfecting" your lien is filing the Notice with Recorder’s office in the county in which the property is located, then filing a lawsuit in that county. The last day to file suit is 2 years after the last day of work. If the owner seeks Bankruptcy protection, you must proceed very carefully.
Automatic Stay
A Bankruptcy petition causes an “Automatic Stay” to go into immediate effect - even against claimants who ddidn't know it was filed. The Stay prohibits lawsuits against the Debtor and its property, as well as any act to collect or enforce a claim. No Notice or lawsuit may be filed without permission from the Bankruptcy Court. If it is, you face severe penalties, including monetary sanctions and loss of lien rights.
However, the Bankruptcy Code offers an alternate remedy.
Filing Notice of Perfection
Sec. 546(b) of the Code makes the Bankruptcy Trustee subject to “generally applicable law” governing perfection of an interest in property. The Illinois Mechanics Lien Act requires filing suit to foreclose your lien rights: if the action was not commenced before the filing of the Bankruptcy, then you may file a “Notice of Perfection of Lien” with the Bankruptcy Court instead. In addition, you should file a Proof of Claim (Secured) using the approved form.
Automatic Stay Terminates
The Automatic Stay terminates if: 1) Trustee abandons the property; 2) the case is dismissed; or 3) the Court grants relief from the automatic stay.
Relief from the Stay
To secure relief from the Stay, you must establish that you could lose your rights if the Court does not grant permission for you to file your lawsuit in State Court, or that any number of other specific circumstances exist that are recognized by Bankruptcy law.
Conclusion
As you can see, the process is not easy, but if you consult and work with an Attorney that has experience in both Bankruptcy and Construction Law, you can enforce and collect.
I hope this information was helpful. Best of luck!