Chapter 11 filing in New Jersey effect on my lien

7 months ago

Hi there,
We have a customer that we did commercial work for and they have now filed Chapter 11 Bankruptcy. They are telling us our lien for payment is no longer valid. From what I am reading, this is a reorganization and bills will be paid so we wish to leave our lien rights in place.

Senior Legal Associate Levelset
474 reviews

It’s never good when a customer goes bankrupt. But, in terms of recovering payment in the face of bankruptcy, mechanics liens are one of the better options out there. This article discusses just about everything there is to know about mechanics liens and construction bankruptcies: How to Protect Your Payments When Dealing with a Construction Bankruptcy.

As discussed in that article, if your customer isn’t the owner of the project property, then the customer’s bankruptcy might not affect the viability of a lien claim all that much. And, even if the customer is the property owner, mechanics liens can still be viable. Though, it may take some maneuvering to ensure the lien enforcement deadline won’t be an issue.

Broadly stated, though: A customer’s bankruptcy filing doesn’t require a lien claimant to release a lien filed against that customer’s property. In fact, mechanics lien claims are well-positioned for recovery when there’s a bankruptcy filing in play since the lien secures the debt.

Of course, a customer’s bankruptcy creates complex and high-stakes situations. And, to best navigate the situation, it’d be wise to consult with a local New Jersey mechanics lien attorney. They’ll be able to review all of the relevant project and bankruptcy documentation, as well as other relevant circumstances, then advise on how best to move forward.

Disclaimer: The information presented here is not legal advice and should not be construed as such. Rather, this content is provided for informational purposes. Do not act on this information as if it is advice. Further, this post does not create any attorney-client relationship. If you do need legal advice, seek the help of a local attorney.
Your answer or comment:
Are you a Registered Expert?
You are not logged in and will be posting
anonymously. Log in Now
Get answers from construction attorneys and payment experts
120 Character Limit